Europe’s bleak midwinter

Europe is heading for an energy supply crunch this winter. EIU’s latest white paper report examines which economies are most vulnerable to gas supply shortages and how governments throughout the region are preparing for the winter energy squeeze.

Key findings from the report include:

• Russian gas flows to Europe via the Nord Stream 1 pipeline will fluctuate between zero and 20% capacity in the coming months, resulting in a recession in Europe in the winter of 2022/23.

• Hungary, the Czech Republic and Slovakia are likely to take the biggest economic hit. Not only will they experience gas shortages, but they are also highly exposed to recession in Germany given strong supply-chain links.

• Germany, Austria and Italy will face gas shortages. EIU expects rationing in the German industrial sector to have region-wide spillover effects.

• Elsewhere in the EU, the main impact will come through high energy prices, falling confidence and weak external trade. The Baltic states and Bulgaria are particularly exposed. Problems in its nuclear sector make France’s position more precarious than might have been expected.

• Next year, Europe will struggle to restock its gas storage without flows from Russia. The winter of 2023/24 will therefore also be challenging. EIU expects high inflation and sluggish growth until at least 2024.

“We expect a recession in Europe this winter, with the brunt of the economic impact coming in the fourth quarter of 2022 and first quarter of 2023. An unsupportive global context—given US monetary tightening, China’s growth slowdown and growing investor nervousness—will exacerbate the downturn.”

JOAN HOEY, REGIONAL DIRECTOR FOR EUROPE, EIU

The full report, ‘Europe’s bleak midwinter: heading for an energy and growth crunch’ is available to download here.

More award-winning insights on the energy crisis in Europe can be found in EIU Viewpoint, our country and industry analysis service. EIU Viewpoint provides unmatched forecasts, analysis and data for nearly 200 countries and six key sectors, helping organisations identify prospective opportunities and potential risks.