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Cost pressures from higher gas prices can propagate through supply chains – EBRD

Oil&Gas Materials 28 September 2022 15:42 (UTC +04:00)
Cost pressures from higher gas prices can propagate through supply chains – EBRD
Laman Zeynalova
Laman Zeynalova
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BAKU, Azerbaijan, September 28. For many economies higher gas prices imply sharp increases in gas import bills, equivalent to up to 4-5 percent of GDP, the European Bank for Reconstruction and Development (EBRD) said in September edition of the Regional Economic Prospects, Trend reports.

“Higher costs and potential disruptions in gas-intensive industries, such as aluminium, glass, iron and steel, paper, and parts of the automotive sector (such as batteries, plastic and tyres) will weigh on growth, in particular in the Slovak and Czech Republics, Romania, Slovenia and Ukraine. Furthermore, Germany is the largest exporter in many of these sectors and imports of inputs produced by German gas-intensive industries account for significant shares of the value added of exports from many of these economies. As a result, disruptions and cost pressures from higher gas prices can quickly propagate through the supply chains,” the report reads.

The report reveals that some economies in the EBRD regions that are less affected by disruptions to Russian gas imports could potentially gain market shares in gas-intensive industries (for instance, Tajikistan in aluminium, Georgia in iron and steel, Jordan in fertilizers).

“However, many still face high energy costs relative to global competitors (for instance due to droughts affecting hydro power generation), as well as increased costs of other inputs through supply chains. New export relationships would also take time to develop.”

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