By Fernando Heller
(EurActiv) — The hypothetical freezing of trade relations between Russia and the EU would hugely impact sectors such as transport, metal, and chemical industries but have a limited impact on the services sector, the Bank of Spain wrote in a report published on Tuesday.
A hypothetical cessation of the remaining trade flows with Russia would negatively affect European economies. However, its magnitude would be substantially smaller than that of the suspension of imports of energy raw materials, the report predicts.
The study focuses on how a hypothetical interruption of importing energy raw materials from Russia could have severe consequences for the Spanish and European economies.
These consequences would be closely linked to the difficulty of substituting these products in the short term, which would reduce the supply of energy, aggravating the current inflationary situation, while at the same time being a burden on economic activity, financial daily Cinco Días reported.
However, the Bank of Spain considers that due to the lower degree of energy dependence on Russian products, the effects on the Spanish economy would be much smaller than those suffered by other EU economies, such as Germany or Italy.
If energy imports from Russia and exports to Moscow are suspended and the most restrictive assumptions regarding the substitution capacity of imports and exports are considered, the total impact on the Spanish economy could mean a fall of up to 2.4% in GDP and an increase of 1.7 percentage points in inflation, in the short term, the report reads.
However, despite the alarming figures for Spain, the report highlights how the effects would be even greater in other large European economies that depend so largely on Russian raw materials like gas and oil.
For the EU as a whole, the additional negative impact on GDP of suspending imports from Russia would be 1.2 percentage points, compared to 0.3 percentage points in the case of Spain.
The impact would be significantly greater in the three main economies of the euro area, Germany, Italy, France and the countries of Eastern Europe, due to their greater energy dependence on Russia.
Specifically, the estimated fall in GDP for Italy, Germany and France would be 3%, 2.6% and 1.5%, respectively.
The impact on the EU as a whole would be between 2.5% and 4.2% of GDP.