Ukraine war impact on European economy The Swiss National Bank said in a research report released on Friday that the war in Ukraine has reduced Europe’s economic growth and “significantly” raised inflation across the continent, with further consequences to come.
The report states that since the Russian invasion of Ukraine in February 2022, European energy prices have risen sharply, financial markets have been in turmoil, and the economies of Russia and Ukraine have shrunk rapidly. The study looked at the economic impact of the war on Germany, Britain, France, Italy and Switzerland and said that if Russia had not invaded Ukraine, output would have been 0.1% to 0.7% higher in the fourth quarter of 2022.
Consumer prices will fall by 0.2% to 0.4% in each country, the working paper said, which aims to stimulate debate, but that is not necessarily the SNB’s view. “In the medium and long term, the negative impact of the war is likely to be greater, especially on the real economy,” the study said.
“Within one to two years, this impact is likely to triple,” it added. Germany has been hit the hardest, the study said. The study states that if Russia does not attack and threaten Ukraine, its gross domestic product (GDP) will increase by 0.7% in the fourth quarter of 2022 and inflation will decrease by 0.4%. The UK was also hit hard, with economic output falling by 0.7% and inflation rising by 0.2%.
Without the conflict, inflation in France would have fallen by 0.3% and GDP growth by 0.1%, while in Italy inflation would have fallen by 0.2% and GDP would have increased by 0.3%. Without the war, Switzerland’s gross domestic product would have increased by 0.3%, while inflation would have fallen by 0.4%, the study added.
But the authors said their estimates were low because they likely underestimated food price inflation and focused on oil prices rather than gas prices. They added that the impact of refugees and increased military spending could be greater than recent conflicts.