IMF says Russian gas embargo could heavily impact central Europe

A Russian fuel embargo would trigger deep recessions in Hungary, Slovakia, the Czech Republic and Italy, the IMF says.

The Worldwide Financial Fund says some nations might face shortages of as a lot as 40 % within the occasion of a complete cut-off of Russian fuel [File: Andrey Rudakov/Bloomberg]

A Russian pure fuel embargo would trigger deep recessions in Hungary, Slovakia, the Czech Republic and Italy until nations can cooperate extra to share different provides, the Worldwide Financial Fund (IMF) has warned.

IMF researchers mentioned in a weblog posting on Tuesday that some nations might face shortages of as a lot as 40 % of their regular fuel consumption within the occasion of a complete cut-off of Russian fuel.

Hungary would undergo essentially the most economically from such an embargo, with a discount of greater than 6 % in gross home product (GDP), whereas Slovakia, the Czech Republic and Italy might see GDP shrink by 5 % if alternate fuel provides, together with these of liquefied pure fuel (LNG), are impeded from flowing freely to the place they're wanted.

Beneath the extra optimistic situation of a completely built-in market, the financial harm is lowered, with Hungary seeing a GDP discount of greater than 3 %, Slovakia and Italy struggling a GDP discount of greater than 2 % and the Czech Republic’s GDP shrinking lower than 2 %.

Germany’s GDP would shrink by the excessive 2 % vary below the extra dire situation and simply over 1 % below the extra optimistic situation, on account of entry to different power sources and the power to decrease consumption.

However German financial exercise could possibly be lowered by 2.7 % in 2023, with increased wholesale fuel costs pushing German inflation up by one other 2 proportion factors in 2022 and 2023.

The IMF researchers mentioned European infrastructure and world provide have coped to date, with a 60 % drop in Russian fuel deliveries since June 2021. Complete fuel consumption within the first quarter, throughout which Russia launched its invasion of Ukraine, triggering Western financial sanctions, was down 9 % from a 12 months earlier, and different provides are being tapped, particularly LNG from world markets.

“Our work suggests that a discount of as much as 70 % in Russian fuel could possibly be managed within the brief time period by accessing different provides and power sources and given lowered demand from beforehand excessive costs,” the researchers mentioned.