Fitch Ratings: Russian natural gas supply cut may result in euro zone recession

Monday, 23 May 2022 16:22:06 (GMT+3)   |   Istanbul
       

International credit rating agency Fitch Ratings has stated that a sudden stop in Russian natural gas supplies to Europe would likely push the euro zone into a recession. An immediate and total cut of Russian natural gas supplies, which is a risk that is rising as the war continues, would result in gas shortages and rationing, causing a major macroeconomic shock, and would be virtually impossible to replace fully in the near term. Moreover, the surge in energy prices in such a scenario would add to inflation pressures.

The EU imports 84 percent of its domestic gas consumption and receives 38 percent of its gas imports from Russia in particular. Fitch estimates that about 30 percent of domestic gas consumption in the EU and the euro zone was supplied by Russia.

The European Central Bank suggests euro zone GDP would fall by 0.7 percent if gas supply declines by 10 percent. A 30 percent loss of gas supply would therefore translate into a two percent decline in euro zone GDP.

Fitch’s March 2022 “Global Economic Outlook” forecasts were for euro zone growth of 2.3 percent in 2023, but recent developments have pointed to downside risks. Gas rationing would likely tip the euro zone into recession in late 2022 or early 2023.


Similar articles

EU economy growth expectations fall to 0.9% for 2024, pressure on inflation persists

19 Feb | Steel News

Euro area enters recession with two consecutive decreases in GDP

09 Jun | Steel News

EU adopts anti-coercion instrument proposal against blackmail from third countries

30 Mar | Steel News

EU economy to avoid recession, though unfavorable conditions persist

15 Feb | Steel News

Voestalpine raises EBITDA forecast for FY 2022-23

25 Oct | Steel News

Fitch: Natural gas supply halt increases likelihood of recession in euro zone

07 Sep | Steel News

Euro area GDP up 0.2 percent in Q1 from Q4

03 May | Steel News

Euro area GDP up 2.2 percent in Q3 from Q2

08 Nov | Steel News

Euro area GDP up two percent in Q2 from Q1

18 Aug | Steel News

Fitch expects world GDP to fall by 4.6 percent in 2020

27 May | Steel News