2022-03-14-牛津经济研究院-Europe_Russia_s_invasion_of_Ukraine_is_sending_tremors_through_CEE_5页_274kb

Summary of CEE Economic Impact from Russian-Ukraine Invasion (March 14, 2022)

• Overview: Russia's invasion of Ukraine has severely impacted Central and Eastern European (CEE) economies, due to energy price hikes, supply shortages, lost access to Russian markets, currency depreciation, and a major refugee crisis. Growth forecasts have been significantly reduced, with risks tilted to the downside amidst high volatility.

• Economic Consequences:

  • Growth forecast cut by approximately 1 percentage point (ppt) for 2022 and 0.5 ppt for 2023.
  • Inflation is at historically high levels, reaching double digits in countries like the Czech Republic, exacerbated by rising commodity prices that erode real incomes and consumer spending.

• Supply Chain and Trade Disruptions:

  • Trade exposure to Russia and Ukraine is low but not negligible, affecting key sectors such as automotive exports and imports of raw materials (e.g., oil, gas, nickel, palladium).
  • Manufacturing is particularly vulnerable due to supply shortages, retaliatory sanctions, and disruptions in freight, leading to reduced industrial production.

• Currency and Monetary Policy:

  • CEE currencies have depreciated notably against the euro, with central banks intervening (e.g., FX interventions by Czech Republic, Hungary, Poland) to stabilize markets, though depreciation continues to fuel inflation.
  • Central banks face a tightrope balancing act between controlling inflation and avoiding economic contraction, planning further rate hikes but facing delays in policy impact due to currency vulnerabilities.

• Refugee Crisis:

  • Over 2.4 million Ukrainians have fled to CEE, with Poland and Hungary receiving the majority. This influx could boost labor supply by 2-4% in key countries but imposes fiscal, logistical, and social challenges, with children, mothers, and elderly constituting a large portion of refugees.

• Outlook: CEE economies remain highly exposed, with ongoing risks including prolonged conflict, supply-chain issues, and fiscal strains from refugee support, potentially delaying recovery.