Europe faces a growing risk of recession due to rising oil and gas prices amid fears that Russia could completely cut off supplies, economists have warned, as quoted by the Guardian.
According to Nomura, a Japanese investment bank with a strong presence in London, EuropeThe economy will be hit by a variety of factors, including lower demand in the United States – its largest export market – the continued fallout from Russiathe invasion of Ukraine and the resulting rise in oil prices. food and energy.
Nomura expects the European economy to start contracting in the second half of 2022 and recession last until the summer of 2023, with the overall decline reaching 1.7% of GDP.
Energy prices has already increased in the second half of 2021 as major economies ease restrictions imposed by the coronavirus pandemic, but RussiaUkraine’s incursion into Ukraine has added new difficulties as the EU, US and UK seek to isolate Russia economically. Europe is still heavily dependent on Russia for its energy supplies, and Russian President Vladimir Putin responded to the sanctions by slowing gas supplies. Russia suspended gas supplies through the Nord Stream 1 gas pipeline to Germany, through the TurkStream gas pipeline to Bulgaria and stopped supplies to Poland through the Yamal gas pipeline, the publication recalls.
Europe is struggling with “largely global conditions (increasing energy prices and inflation, rising geopolitical risks and uncertainty) suggesting that European economies will suffer the same fate – a recession — like the United States“, wrote George Buckley, economist at Nomura. Inflation in the euro zone reached 8.6% year on year in June, the highest level since the formation of the bloc in 1999.
Analysts at US investment bank JP Morgan Chase said last week that Russia could also push oil prices higher if it uses production cuts to retaliate against efforts to contain prices by the group of major economies of the G7. Analysts predicted a more than three-fold increase prices at $380 per barrel if Russia reduced production by 5 million barrels per day. At the end of last week, a barrel of Brent for September delivery was worth 111 dollars on the futures markets.
“The [Russian] the government is likely to retaliate by cutting production to harm the West“wrote JP Morgan analysts.”The contraction of the global oil market is on the side Russia.”
Kay Neufeld and Jonas Keck, economists at the Center for Economic and Business Research, said Russiathe invasion of Ukraine had created a “real pan-European crisis” and the probability of a recession in Europe was at least two out of five.
Germany, Europethe world’s largest economy, is particularly vulnerable due to Russiacontrol of the Nord Stream 1 gas pipeline. The pipeline is scheduled to be shut down for 10 days beginning July 11 for scheduled annual maintenance. Last week, German Economy Minister Robert Habeck said the government feared Russia would refuse to reopen the pipeline, which could lead to winter gas shortages.
“It seems clear that in the event of a gas shortage in Europea severe recession will be almost certain“, Neufeld and Keck wrote.”Indeed, European countries are interconnected not only by energy interconnections, but also by highly integrated supply chains..”
“Restricted gas supplies will lead to further increases in energy consumption prices for consumers, adding to inflationary pressures and taking up an even larger share of household disposable income, which in itself poses a risk of recession.”
European countries dependent on Russian gas are racing to find alternative supplies. The German government hopes that two floating terminals capable of accepting liquefied natural gas will be commissioned this winter.
Follow Novinity.com on Twitter and Facebook
Email us at email@example.com
Информирайте се на Български – Novinity.bg