The war in Ukraine has a direct cost. The state spends money to provide arms and logistical aid and to accommodate Ukrainian refugees. War also has a huge indirect cost for households.
After three months of war, inflation was close to 9% in May. This is a record for 40 years. After energy, food prices are expected to increase by 15-20% by September. The total cost on the household budget looks particularly high.
“For an average household, we might have an additional cost of living of 500 to 600 euros net, this includes the increase in energy prices that we are already experiencing, but we will certainly experience a sharp increase in food prices from the month of september“, explains Bruno Colmantprofessor of economics at theUCLouvain and theICHEC.
“And then, for example, for people who are tenants there will be an indexation of rents. So, overall, it will be a very significant cost that might reach 10% of the salary of people less favored“.
So far, the impact of the government’s economic measures amounts to 4 billion euros.
This cost includes three main expenses:
– 2.6 billion euros for the energy bill with in particular the reduction in VAT
– 450 million euros for military expenditure
– 800 million euros for humanitarian aid and the reception of refugees
“A series of expenses will increase for the State. Not only salaries, but it will probably be necessary to help households in difficulty in the energy field, it is the State which will have to take charge of that. And the increase in military spending is under discussion at the moment, so it will be an overall cost for the Belgian economy. It is very difficult to estimate it, but I believe that for this year, the growth shock for the economy will be of the order of 5 billion euros“, specifies the professor of economics.
The total direct and indirect cost of the Ukrainian conflict might therefore reach 9 billion euros by the end of the year.
The leaders of the 27 European countries are meeting this followingnoon in Brussels to try to limit our dependence on Russian gas and oil.
