The conflict in Ukraine has reached its 53rd day and the end of the violence, at present, seems far away. In an interview with Bild am Sonntag, the president of the European Commission Ursula von der Leyen confided: “We must prepare ourselves for the fact that, in the worst case, the war could last months, even years”. A dramatic scenario, which, from an economic point of view, will have heavy repercussions on the economies of many countries.
In a recent hearing on the Def, the Economic and Financial Document, the Parliamentary Budget Office sounded the alarm: once peace returns, there will be unknowns and challenges for the Italian economy. “When the military hostilities are over – underlined the Upb – a phase of tensions will open up in commercial relations and in the raw material markets, with inevitable repercussions for an economy as heavily dependent on foreign countries as the Italian one”.
Stagflactive effects if normalization will delay
“The basic scenario of the forecast of the Def – reads a passage from the memory that the president of the UPB Lilia Cavallari, filed Thursday 14 April with the Budget Committees of the Chamber and Senate, on the occasion of her hearing on the Document of economics and finance – faces a resolution of the conflict in a relatively short time which, at the moment, however, appear to be very uncertain. If the conflict lasted throughout the second quarter and the normalization process involved the second half of the current year, the stagflationary economic effects (ie the simultaneous presence of inflationary waves and stagnation, ed.) Would be more evident “.
Risk of a further reduction in GDP this year
In particular, «using the Oxford Economics international macroeconometric model, the UPB simulated what the effects of a one-quarter conflict would be; the transmission channels considered are consumer and business confidence, interest rates, commodity prices and the crisis of the Russian economy ». Well, “on the basis of the exercise carried out, the longer duration of the conflict would entail, compared to the already discounted growth revision, a further reduction in GDP this year, but with drag on the next one as well”.
Italian economy among the hardest hit by this shock
Again: «The Italian economy would be among the most affected by this shock and GDP would suffer an additional contraction of about one and a half percentage points over the two years as a whole. At the same time, there would be more marked increases in consumer prices, for about 2.5 percentage points cumulated in 2022-23 in the case of Italy “.