© Bloomberg. Displaced Ukrainians wait outside an immigration office in Brussels, Belgium, on Monday, March 14, 2022. At least 2.5 million Ukrainians are estimated to have fled their country in the wake of Russia’s invasion, with Poland taking the bulk of the influx.
Euro-zone governments’ extra spending caused by Russia’s invasion of Ukraine will cumulatively total 2% of annual output by the end of next year, according to economists at UBS Group).
That comprises supplementary expenditure of 1.5% of gross domestic product in 2022 and another 0.5% in the following 12 months, Felix Huefner, Reinhard Cluse, Anna Titareva and Jennifer Aslin said in a report this week.
While the initial focus of budgetary expansion will be on mitigating higher energy bills, further costs incurred will include handling the refugee influx, and raising spending on defense and energy security, the economists said.
The UBS calculation provides one initial glimpse of the effect on public finances that had already been stretched by measures to cushion the economic impact of the pandemic. Brussels has signaled that rules capping deficits in the region that were suspended for the outbreak could remain so into next year.
“We doubt any decision to that effect would be opposed by the more hawkish countries,” the UBS economists said. Even if the suspension were lifted, “we assume that the European Commission would provide sufficient leeway for countries with budget overruns, also by taking into account additional spending on refugees, defense and energy security.”
©2022 Bloomberg L.P.
Euro Region Faces War Fallout Cost of 2% of GDP, UBS Estimates
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.