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.



Saudi Transport, Logistics Sector Set for 10% Growth in Q2

An investor monitors a trading screen at the Saudi financial market in Riyadh. (AFP)
An investor monitors a trading screen at the Saudi financial market in Riyadh. (AFP)
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Saudi Transport, Logistics Sector Set for 10% Growth in Q2

An investor monitors a trading screen at the Saudi financial market in Riyadh. (AFP)
An investor monitors a trading screen at the Saudi financial market in Riyadh. (AFP)

As Saudi companies start reporting their Q2 financial results, experts are optimistic about the transport and logistics sector. They expect a 10% annual growth, with total net profits reaching around SAR 900 million ($240 million), driven by tourism and an economic corridor project.

In Q1, the seven listed transport and logistics companies in Saudi Arabia showed positive results, with combined profits increasing by 5.8% to SAR 818.7 million ($218 million) compared to the previous year.

Four companies reported profit growth, while three saw declines, including two with losses, according to Arbah Capital.

Al Rajhi Capital projects significant gains for Q2 compared to last year: Lumi Rental’s profits are expected to rise by 31% to SAR 65 million, SAL’s by 76% to SAR 192 million, and Theeb’s by 23% to SAR 37 million.

On the other hand, Aljazira Capital predicts a 13% decrease in Lumi Rental’s net profit to SAR 43 million, despite a 44% rise in revenue. This is due to higher operational costs post-IPO.

SAL’s annual profit is expected to grow by 76% to SAR 191.6 million, driven by a 29% increase in revenue and higher profit margins.

Aljazira Capital also expects a 2.8% drop in the sector’s net profit from Q1 due to lower profits for SAL and Seera, caused by reduced revenue and profit margins.

Mohammad Al Farraj, Head of Asset Management at Arbah Capital, told Asharq Al-Awsat that the sector’s continued profit growth is supported by seasonal factors like summer travel and higher demand for transport services.

He predicts Q2 profits will reach around SAR 900 million ($240 million), up 10% from Q1.

Al Farraj highlighted that the India-Middle East-Europe Economic Corridor (IMEC), linking India with the GCC and Europe, is expected to boost sector growth by improving trade and transport connections.

However, he warned that companies may still face challenges, including rising costs and workforce shortages.