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Gas supply shock would cut value of Europe’s economy, ECB says

© Reuters. FILE PHOTO: A pressure gauge is seen at a Ukrainian gas compressor station in the village of Boyarka near the capital Kiev January 2, 2009. REUTERS/ Gleb Garanich

FRANKFURT (Reuters) – A negative shock from any gas supply disruption would eat into the value of goods and services produced in the euro zone, the European Central Bank said on Tuesday, worsening the impact of high energy prices on the bloc’s growth.

Record energy prices in response to concern a Russian attack on Ukraine will lead to disruption of fuel exports to Europe, have dented euro zone growth. Russia denies any plan to invade.

In an Economic Bulletin article on Tuesday, the ECB said it expected high energy prices would reduce euro zone economic output by around 0.2% this year, compared with baseline levels of GDP, with the biggest impact in the first quarter.

GRAPHIC – Europe’s energy dependency

Over 90% of the gas used in the euro zone is imported, the ECB said, meaning negative economic impacts would be aggravated if the bloc loses some of its gas supply.

“The direct and indirect impact of a hypothetical 10% gas rationing shock on the corporate sector is estimated to reduce euro area gross value added by about 0.7%,” the bank said.

The actual fall could even be greater as the modelling does not consider the effect of energy price changes, the ECB said.

Austria and Slovakia would take the biggest hit, the ECB said, while among industrial sectors, basic metals would likely suffer the most.

GRAPHIC – Impact of a 10% cut in the gas supply in Europe

Gas supply shock would cut value of Europe’s economy, ECB says

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