The International Monetary Fund (IMF) warned on Tuesday that if Russia cuts off natural gas supplies to Europe, the economies of some Central and Eastern European countries will shrink by as much as 6% and fall into a deep recession.
The annual maintenance of Nord Stream 1, Russia’s natural gas pipeline to Europe, will end on Thursday (21), and the European Union is planning for a variety of scenarios.
The IMF said on Tuesday that the risk of a full Russian gas “death” was fueling concerns regarding gas shortages, rising prices and the economic fallout, with European countries lacking plans to effectively manage and minimize the impact despite swift action.
The IMF analyzed that if Russia completely cuts off natural gas supply, it will have little impact on the economic growth of countries such as Sweden, Denmark and Greece, butHungary, Slovakia, Czech RepublicThe three will be among the hardest hit European countries, with up to 40% at risk of gas shortages and a deep recession with gross domestic product (GDP) shrinking by as much as 6% in the event of a further surge in energy prices.
The IMF predicts that the economic damage in Italy is also considerable, with GDP likely to fall by more than 5%, and the impact in Germany and Austria may be less severe, depending on the availability of alternative energy sources and the ability to reduce household gas consumption.
Russia’s invasion of Ukraine has prompted the IMF to downgrade its global growth forecast to 3.6%, with total natural gas consumption falling 9% annually in the first quarter of 2022. Citigroup also released a report on Tuesday that if Russia cuts off natural gas supplies to Europe, it will trigger a recession, and European stocks may plummet by 10%.
The IMF called on EU governments to do more to secure global LNG markets and alternative supplies, address infrastructure bottlenecks for importing and distributing gas, and develop strategies to share supplies in emergencies.
According to foreign media reports, it is estimated that the Beixi No. 1 pipeline will resume as scheduled, but the supply will be lower than normal.WTI CrudeFutures rose 1.6 percent to settle at $104.22 a barrel on Tuesday.Brent CrudeFutures rose 1 percent to settle at $107.35 a barrel, their highest close since July 4.