Study: Ukraine War Expected to Have Bigger Impact on European Economies

 Ukrainian servicemen prepare to fire a M109 self-propelled howitzer towards Russian troops, amid Russia's attack on Ukraine, in Donetsk region, Ukraine September 22, 2023. (Reuters)
Ukrainian servicemen prepare to fire a M109 self-propelled howitzer towards Russian troops, amid Russia's attack on Ukraine, in Donetsk region, Ukraine September 22, 2023. (Reuters)
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Study: Ukraine War Expected to Have Bigger Impact on European Economies

 Ukrainian servicemen prepare to fire a M109 self-propelled howitzer towards Russian troops, amid Russia's attack on Ukraine, in Donetsk region, Ukraine September 22, 2023. (Reuters)
Ukrainian servicemen prepare to fire a M109 self-propelled howitzer towards Russian troops, amid Russia's attack on Ukraine, in Donetsk region, Ukraine September 22, 2023. (Reuters)

The war in Ukraine has reduced European economic growth and "considerably" pushed up inflation across the continent, the Swiss National Bank said in a study published on Friday, with worse effects still to come.

Since Russia invaded Ukraine in February 2022, Europe has seen a surge in energy prices, financial market turmoil and a sharp contraction in the economies of both Russia and Ukraine, the report said.

Examining the war's economic impact on Germany, Britain, France, Italy and Switzerland, the study said output would have been between 0.1% and 0.7% higher in the fourth quarter of 2022 if Russia had not invaded Ukraine.

Consumer prices in each of the countries would have been between 0.2% and 0.4% lower, said the working paper, which aims to stimulate discussion and is not necessarily the viewpoint of the SNB.

"The negative consequences of the war are likely to be far greater in the medium-to-long term, especially with regard to the real economy," the study said.

"In one to two years, this effect is likely to be approximately twice as large," it added.

Germany was the worst affected, the study said. Its GDP would have been 0.7% higher and inflation would have been 0.4% lower in the fourth quarter of 2022 if Russia had neither attacked nor threatened Ukraine, the study said.

Britain was also hard hit, with economic output reduced by 0.7% and inflation increased by 0.2%.

France would have seen inflation 0.3% lower and GDP 0.1% higher without the conflict, while Italian inflation would have been 0.2% lower and GDP 0.3% higher.

Swiss GDP would have been 0.3% higher and inflation 0.4% lower without the war, the study added.

However, the authors said their estimates tended towards the low side because they "probably" underestimated food price inflation and looked at oil prices rather than gas prices.

The impact of refugees and increased military spending may be more than in recent conflicts, they added.



Oil Prices Steady as Expected OPEC+ Output Increase Offsets Canada Supply Pressure

FILE PHOTO: A worker walks at Rumaila oil field in Basra, Iraq, November 28, 2017. REUTERS/Essam Al-Sudani/File Photo
FILE PHOTO: A worker walks at Rumaila oil field in Basra, Iraq, November 28, 2017. REUTERS/Essam Al-Sudani/File Photo
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Oil Prices Steady as Expected OPEC+ Output Increase Offsets Canada Supply Pressure

FILE PHOTO: A worker walks at Rumaila oil field in Basra, Iraq, November 28, 2017. REUTERS/Essam Al-Sudani/File Photo
FILE PHOTO: A worker walks at Rumaila oil field in Basra, Iraq, November 28, 2017. REUTERS/Essam Al-Sudani/File Photo

Oil prices held steady on Wednesday as concern around the OPEC+ groups next output increase were offset by Canadian supply pressures due to wildfires there, while global trade tensions continue to linger.

Brent crude futures inched 18 cents lower, or down around 0.3%, at $65.45 a barrel by 0905 GMT, while US West Texas Intermediate crude was 19 cents lower, also down 0.3%, at $63.22 a barrel.

The unwinding of 411,000 barrels per day (bpd) in July by OPEC+ states was weighing on the market, Janiv Shah, vice president of oil commodity markets analysis at Rystad Energy said, but there was some support from the removal of Canada's 344,000 bpd production due to the wildfires.

Both benchmarks climbed about 2% on Tuesday to a two-week high, driven by worries over supply disruption and expectations that Iran would reject a US nuclear deal proposal key to easing sanctions on the major oil producer, Reuters reported.

"Geopolitical tensions are simmering in the background, with risks to fundamentals skewed to the upside, as Russian and Iranian oil exports remain elevated," Barclays analyst Amarpreet Singh said in a research note late on Tuesday.

US President Donald Trump and Chinese leader Xi Jinping are likely to speak this week, days after Trump accused China of violating a deal to roll back tariffs and trade curbs.

On Tuesday, the Organisation for Economic Co-operation and Development (OECD) cut its global growth forecast as the fallout from Trump's trade war takes a bigger toll on the US economy.