The European Bank for Reconstruction and Development has warned that a sudden halt in Russian gas exports could send developing economies in Europe, Central Asia and North Africa back to pre-pandemic GDP levels, Reuters reported.
Many countries in the EBRD region, which covers about 40 countries stretching from Mongolia to Slovenia and Tunisia, are dependent on Russian gas and a sudden cut in supplies will reduce per capita profits by 2.3% this year and 2% in 2023 .
Europe is discussing the issue of stopping purchases of hydrocarbons in Russia, said chief economist Beata Javorcik.
There is also the possibility that Russia will cut off gas supplies, she said.
The economy across the region grew 6.7% last year, after contracting 2.5% in 2020 as COVID rocked the global economy and financial markets, the lender estimates.
But Moscow has already cut off gas supplies to Poland and Bulgaria, and markets are focused on the impact of the EU embargo on Russian oil, as well as paying for gas in rubles, as demanded by the Russian Federation.
The EBRD has warned that cutting off gas supplies will deal the biggest blow to the economies of EU member countries both with significant gas imports from Russia and heavily dependent on gas in their energy mix, such as the Czech Republic, Hungary and Slovakia.
The sudden stoppage is not the EBRD's base case, which assumes continued gas supplies in its calculations. Even so, though, growth is expected to be more sluggish than the lender's forecast in March, with growth forecasts cut to 1.1% from 1.7%.
EBRD economists also cut their forecast for 2023 to 4.7%. Recent increases in food and energy prices exacerbated inflationary pressures that were already high due to a recovery in global demand as COVID-19 restrictions were gradually lifted, the report said.
Rampant inflation is putting pressure on poorer countries such as North Macedonia, Morocco, Egypt and Jordan, where food makes up more than 25% of the consumer price index. Average inflation in the EBRD's regions of operations reached 11.9% in March 2022, approaching levels last seen at the end of 2008.
Ukraine's GDP is projected to contract by 30% in 2022 instead of the 20% annual decline that was expected two months ago.
According to forecasts, the Russian economy will shrink by 10%.
Nine years of growth will be nullified, Javorcik added, noting that the main impact of sanctions on Russia will be seen in the medium and long term.
Growth in Turkey, the EBRD's largest recipient country, will remain muted at 2% in 2022 and 3.5% next year, due in part to government spending ahead of national elections in June 2023.