IMF warns of the repercussions of loss of Russian gas on European economy


Published: 2022-04-23 18:57

Last Updated: 2024-06-24 15:20

IMF warns of the repercussions of loss of Russian gas on European economy
IMF warns of the repercussions of loss of Russian gas on European economy

A senior official at the International Monetary Fund told AFP that Europe can manage without Russian gas for six months, but the economic repercussions will be severe after the expiration of this period.

The Director of the International Monetary Fund in charge of Europe, Alfred Kamer, urged countries in the region to take a series of steps to mitigate the blow, including reducing consumption in order to build stocks.

The region depends on Russia for the bulk of its energy needs, especially natural gas. Economists at the International Monetary Fund have studied the economic cost of losing Moscow's supplies.

"For the first six months, Europe can deal with a disruption of this kind by having alternative supplies and using the available stocks," Kamer said in an interview with AFP on the sidelines of the Spring Meetings between the International Monetary Fund and the World Bank.

"But if this outage continues into winter, and over a longer period, it will have major repercussions" on the European economy, he added.

Western countries have considered imposing a ban on Russian energy imports in response to the invasion of Ukraine, while Moscow could also cut supplies in response to sanctions against its government.

The International Monetary Fund estimates that the total losses of Russian gas and oil supplies could cost the European Union three percent of GDP, depending on how severe the next winter.

Kamer called for steps to prepare for this possibility.

"No one option has big ramifications, there are many smaller actions that will have bigger ramifications," including by finding alternative suppliers, something some countries have already begun to do, he said.

- No stagnation -

He pointed out that consumers should also play an important role in this regard, while governments should educate the population through "public campaigns to reduce energy consumption."

"The consumer can act now," he said, and the reduction in consumption means that more fuel can be stored in the event that supplies are disrupted.

While the war in Ukraine has significantly slowed growth, Kamer said it "will not derail the recovery" and stressed that he does not expect a European-wide recession.

He stated that the largest eurozone economies, with the exception of Spain, would be "weak in 2022" and would record almost zero growth in one or two quarters, and could even record a technical stagnation by recording negative growth in two consecutive quarters.

But the International Monetary Fund expects these economies to recover in the second half of this year.

- "Gift" -

Russia's attack on its neighbor led to the influx of about five million refugees, which posed a challenge to European countries that suffer from pressure on their budgets while dealing with the influx of refugees.

Poland, which received the largest number of Ukrainians, is the most affected.

The fate of these people after the war is still unclear, knowing that most of them are women and children.

"Some of these refugees will remain in Europe, I'm sure of that," Kamer said, noting that it could be a "gift" for countries with an aging population and a shortage of workers.

"But it could be bad for Ukraine if many refugees decide to stay" abroad, he added.