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 Edges Up on Strong US GDP Data

A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo
A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo
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Oil Edges Up on Strong US GDP Data

A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo
A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo

Oil prices were up slightly on Friday on stronger-than-expected US economic data that raised investor expectations for increasing crude oil demand from the world's largest energy consumer.

But concerns about soft economic conditions in Asia's biggest economies, China and Japan, capped gains.

Brent crude futures for September rose 7 cents to $82.44 a barrel by 0014 GMT. US West Texas Intermediate crude for September increased 4 cents to $78.32 per barrel, Reuters reported.

In the second quarter, the US economy grew at a faster-than-expected annualised rate of 2.8% as consumers spent more and businesses increased investments, Commerce Department data showed. Economists polled by Reuters had predicted US gross domestic product would grow by 2.0% over the period.

At the same time, inflation pressures eased, which kept intact expectations that the Federal Reserve would move forward with a September interest rate cut. Lower interest rates tend to boost economic activity, which can spur oil demand.

Still, continued signs of trouble in parts of Asia limited oil price gains.

Core consumer prices in Japan's capital were up 2.2% in July from a year earlier, data showed on Friday, raising market expectations of an interest rate hike in the near term.

But an index that strips away energy costs, seen as a better gauge of underlying price trends, rose at the slowest annual pace in nearly two years, suggesting that price hikes are moderating due to soft consumption.

China, the world's biggest crude importer, surprised markets for a second time this week by conducting an unscheduled lending operation on Thursday at steeply lower rates, suggesting authorities are trying to provide heavier monetary stimulus to prop up the economy.