MOSCOW, 5 Oct — PRIME. EU spending to mitigate the effects of the energy crisis in 2023 could amount to 1-1.6 trillion euros in total – this is comparable to potential GDP losses if Europe is inactive, but should avoid further weakening of its economy, according to the study “European Energy Balance in the New Reality”. “Yakov and partners” company.
“The total EU spending on gas reimbursement to businesses and households, additional compensation to employees of shutdown enterprises, investments in reducing energy dependence and other measures in 2023 could amount to a total of 1-1.6 trillion euros. This is comparable to the potential loss of GDP in the absence of active countermeasures crisis, but should allow avoiding the domino effect and further weakening of the economy,” experts say.
As the company expects, in 2023 the governments of European countries will continue to manually manage the economy or will be forced to face a fall in GDP by 0.9-1.7 trillion euros, or 6.5-11.5% due to an increase in energy imports, a reduction production and exports, and spillovers on related industries. “A crisis of this magnitude is likely to cause an increase in the number of bankruptcies and a domino effect in the financial sector of the economy, a drop in consumer demand and the curtailment of investment programs by businesses and, in general, lead to a depression,” analysts suggest.
The main negative effect, according to the authors of the study, is due to the fact that a number of the most energy-intensive industries, due to a shortage of gas and rising energy costs, may eventually turn out to be uncompetitive. Enterprises in these industries, depending on the scenario, will be forced to reduce production by 10-60% from the level of 2021.
At the same time, the study notes, interventions will accelerate the budget deficit to 2 trillion euros in annual terms and increase the debt burden of the EU public sector to 100% of GDP. Although the impact of the energy crisis in 2022 is somewhat mitigated, as the price effect is passed on to consumers with a delay of several months, double-digit inflation is already observed in Europe, some production is closed, and debt service costs are rising.
According to experts’ forecasts, as early as this year, the decline in GDP due to higher energy prices and their physical shortage may amount to more than 1%, or about 200 billion euros. Anticipating the consequences, the governments of the EU countries have already announced programs of budgetary assistance to businesses and the population in the amount of more than 320 billion euros.