untitled design

EBRD: Sudden shutdown of Russian gas will vaporize post-pandemic recovery

Russia, emerging economies in Europe, Central Asia and North Africa could cut off gas supplies to pre-pandemic levels, eroding recovery from the health crisis, the European Union (EU) has said in a statement. Reconstruction and Development (ABRD).

Many countries in the EBRD, which includes about 40 economies, from Mongolia to Slovenia and Tunisia, are dependent on Russian gas and a sudden supply cut would reduce per capita output by 2.3% this year. year and by 2% in 2023, according to the bank’s latest report.

“Europe is talking about stopping the purchase of hydrocarbons from Russia,” EBRD chief economist Beata Jaworczyk told Reuters, adding: “But there is a possibility that Russia will cut off gas supplies.”

The EBRD estimates that economies in its region grew at a rate of 6.7% last year after shrinking by 2.5% in 2020 when the coronavirus shook the global economy and financial markets.

But Moscow has already cut off gas supplies to Poland and Bulgaria, and markets are focusing on the impact of an embargo on Russian oil and how to pay for gas later this month through the new Russian mechanism it has imposed. Putin.

As the EBRD warns, the disruption of gas flows will mainly affect EU economies that either import significant gas from Russia or whose energy mix is ​​heavily dependent on Russian gas, such as the Czech Republic, Hungary and Slovakia.

However, the sudden cessation of gas supplies from Russia is not the basic scenario of the EBRD, which estimates that flows will continue. But even in this case, the growth of the economies is now expected to be more subdued compared to the bank’s forecasts in March, with the bank “seeing” a growth rate of 1.1% compared to 1.7% previously, mainly due to the higher shrinkage of the Ukrainian economy.

“There is a real possibility of a recession, but we are not there yet,” Jaworcic said at the start of the annual meeting of the EBRD and the Marrakesh Business Forum.

He added that interest rate hikes in developed economies would widen public debt worldwide and hit most countries, such as Jordan, Tunisia and Egypt, where debt costs range from 4% to 8% of GDP. .

EBRD economists also revised their estimates for 2023 to 4.7% from 5% in March, citing inflationary pressures.

“Recent increases in food and energy prices have exacerbated inflationary pressures, which were already strong due to the recovery in global demand as COVID-19 restrictions are gradually being lifted,” the EBRD said in a report.

Galloping inflation has put pressure on poorer economies such as northern Macedonia, Morocco, Egypt and Jordan, where food accounts for more than 25% of the consumer price index. Average inflation in the EBRD regions reached 11.9% in March 2022, approaching the levels last observed at the end of 2008.

As for Ukraine in particular, the country’s GDP is projected to shrink by 30% in 2022 instead of the 20% expected two months ago.

Accordingly, Russia’s economy is expected to shrink by 10% and remain stagnant in 2023.

Finally, growth in Turkey, the EBRD’s largest recipient of funds, is set to remain “sluggish” at 2% in 2022 and 3.5% next year, in part due to government spending ahead of the June national elections. 2023.

Source: Capital

You may also like

The trader named 25 promising coins
Top News
David

The trader named 25 promising coins

Trader Xremlin, popular in the crypto community, published a selection of the 25 most promising, in his opinion, small-cap cryptocurrencies.

Get the latest

Stay Informed: Get the Latest Updates and Insights

 

Most popular