The IMF warns of a strong blow to central Europe if natural gas is cut off

A possible cut-off in Russian natural gas flows would plunge Hungary, Slovakia, the Czech Republic and Italy into deep recession unless they step up cooperation on alternative supplies, the International Monetary Fund warned today.

In particular, IMF researchers blogged that some countries could face shortfalls of up to 40% of their normal consumption in the event of a complete cessation of Russian flows.

In such a case Hungary would take the biggest hit, with a plunge of more than 6% in its GDP, while in Slovakia, the Czech Republic and Italy the contraction could reach as much as 5%, if alternative supply flows do not continue unhindered. including liquefied natural gas.

In the most optimistic scenario of a fully integrated market, the economic damage for Hungary is limited to 3% of its GDP, while Slovakia and Italy will face a 2% decline and the Czech Republic’s GDP will shrink by just under 2%.

In the worst-case scenario, of a complete shutdown, German GDP will shrink by 2%, while in the optimistic case the losses for Berlin will reach 1% of GDP, provided access to alternative energy sources and a reduction in consumption.

IMF researchers also report that European infrastructure and global supply face a 60% reduction in Russian natural gas deliveries from June 2021.

It is noted that the total consumption of natural gas in Europe in the first quarter, during which Russia carried out its invasion of Ukraine triggering economic sanctions from the West, was down by 9% compared to a year earlier, while alternative supplies from the global markets, especially LNG.

“We estimate that a reduction of up to 70% in Russian natural gas could be addressed in the short term with access to alternative supplies and energy sources and given reduced demand due to extremely high prices,” the IMF researchers said.