Exclusive-ECB policymakers told Ukraine war may shave 0.3%-0.4% off GDP

© Reuters. FILE PHOTO: European Central Bank Chief Economist Philip Lane speaks during a Reuters Newsmaker event in New York, U.S., September 27, 2019. REUTERS/Gary He/File Photo

By Balazs Koranyi and Francesco Canepa

PARIS (Reuters) – European Central Bank chief economist Philip Lane told policymakers meeting in Paris the Ukraine conflict may reduce the euro zone’s economic output by 0.3%-0.4% this year, four people close to the matter told Reuters.

This was the “middle scenario” presented by Lane at a Governing Council meeting on Thursday, hours after Russia’s invasion of Ukraine.

Lane also presented a severe scenario where GDP is reduced by close to 1% and a mild scenario where events in Ukraine had no impact on the currency bloc, which was now considered unlikely.

One source described the estimates as “back-of-the-envelope” calculations, another said they were “very preliminary” and a third said they were mostly derived from commodity prices.

All sources said Lane would bring more refined forecasts to the March 10 meeting, at which the ECB is expected to decide the future of its stimulus programme.

Lane did not present new inflation forecasts but he did tell the meeting there would be a significant increase in the 2022 projection, while hinting that estimates at the end of the horizon could still be below the ECB’s 2% target.

The ECB’s forecast horizon currently stretches to 2024.

An ECB spokesperson did not immediately respond to a request for comment.