How might a 20% decline in imported energy affect European economies?

This most recent Interim Economic Outlook, focusing on the impacts of the war in Ukraine, estimates that global economic growth could be more than 1 percentage point lower this year than projected before the conflict, while inflation, already high at the start of the year, could be higher by at least a further 2 percentage points on aggregate across countries.

Further illustrative simulations - in this case a decline of 20% from direct and indirect imports of fossil fuels, refined fuel products and electricity and gas supply - would reduce gross output in the European economies by over 1 percentage point, with significant differences across countries.

The hardest hit European economies would be those that have a common border with either Russia or Ukraine, and in terms of sectors, would be the domestic energy-producing sectors, air transport, chemicals and metals manufacturing.

These estimates may understate the disruptions from lower energy availability. It is also possible that some reduction in imported energy could be offset by stronger domestic production, drawing on reserves or improved energy efficiency.

See also: Economic and Social Impacts and Policy Implications of the War in Ukraine