Russia’s natural gas embargo is seen as potentially causing significant recessions in Hungary, Slovakia, the Czech Republic and Italy unless countries can work together more to share alternative supplies, the IMF said on Tuesday.
IMF researchers said in a recent post that some countries are likely to face a shortfall of 40% of their normal gas consumption in the event of a cut in Russia’s gas volume.
Hungary among the countries is expected to be most affected by such sanctions with a reduction of more than 6% in gross domestic product, while Slovakia, the Czech Republic and Italy could see GDP shrink by 5% if supplies of alternative gas, including liquefied natural gas are blocked.
Under a more optimistic scenario in a fully integrated market, the impact on the economy is reduced with Hungary seeing a GDP reduction of more than 3%, Slovakia and Italy experiencing a GDP reduction of more than 2%and the Czech Republic’s GDP shrinking by less than 2%.
Germany’s GDP will shrink by a high 2% range under a more dire scenario and just over 1% under a more optimistic scenario, due to access to alternative energy sources and the ability to reduce consumption.
Waima so there is a probability that German economic activity could decrease by 2.7% in 2023 with higher wholesale gas prices pushing German inflation to increase by another 2 percentage points in 2022 and 2023.
IMF researchers say European infrastructure and global supplies have faced a 60% decline in Russian gas shipments since June 2021. Total gas consumption in the first quarter, as Russia launched an attack on Ukraine, triggered Western economic sanctions leading to a 9% decline.
Finally, researchers are of the view that a reduction of up to 70% in Russian gas can be managed in the short term by accessing alternative supplies and energy sources.
