BAKU, Azerbaijan, August 9. The Euro area economy is expected to shrink by the end of 2022, due to higher natural gas prices, Trend report via the recent update from the JP Morgan investment bank.
According to the report, the real GDP growth of the Euro area in 2022 will total 3 percent, with a drastic drop to 0.7 percent in 2023.
“Preparing for a worst-case scenario of a complete halt to Russian gas supply, the EU Council has adopted a savings plan that aims to immediately reduce gas demand. Preventive gas savings - with average targets set at 10-15 percent of gas consumption starting this month - are calibrated to withstand a shutdown of Russian supply from an EU-wide perspective,” the report said.
As the bank noted, the aim is to increase gas storage above the EU target of 80 percent, allowing for coordinated savings and reallocation of funds in the region to reduce the risk of rationing.
“Among the large economies in the region, Germany is the most susceptible to rationing while Italy has made substantive progress mitigating this risk. France and Spain also face a limited risk of rationing, but still are exposed to a drag from elevated gas prices,” JP Morgan added.
According to the bank, “as gas storage reaches the 80 percent target, coordinated savings and redistribution across the region mitigate rationing risk and size of economic impact. Exposure to economic shock, while mitigated, remains asymmetric and proportional to Russian dependence”.
Meanwhile, JP Morgan forecasts the global real GDP to expand 2.8 percent in the third quarter, following the 1 percent contraction tracking for the second quarter of the current year.
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