Report: Russia Gas Flow Stop Could Erase Post-COVID Recovery Across EBRD Region

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An abrupt halt of Russian gas exports could see economies in emerging Europe, central Asia and north Africa slide back to pre-pandemic GDP levels, the European Bank for Reconstruction and Development (EBRD) warned on Tuesday, Reuters reported. Many countries in the EBRD's region of operation, which covers some 40 economies stretching from Mongolia to Slovenia and Tunisia, depend on Russian gas and a sudden ceasing of supplies would lower output per capita by 2.3% this year and 2% in 2023, according to the lender's latest report. "Europe is discussing to stop purchases of hydrocarbons from Russia," chief economist Beata Javorcik told Reuters. "There is also the possibility that Russia would stop supplying its gas." The lender estimates that economies across its region grew 6.7% last year following a 2.5% contraction in 2020, when COVID roiled the global economy and financial markets. But Moscow has already shut off gas flows to Poland and Bulgaria, and markets are focused on the impact of an EU embargo on Russian oil as well as how gas will be paid for by deadlines later this month via a Russian payment mechanisms. Ceasing gas flows would deal the biggest blow to EU member economies with both significant gas imports from Russia and a large dependence on gas in their energy mix, such as the Czech Republic, Hungary and Slovakia, the EBRD warned. A sudden stop is not the EBRD's base case scenario, which assumes for its calculations a continued delivery of gas. Though even then, expansion is now expected to be more sluggish than the lender estimated in March, with growth forecasts trimmed to 1.1% from 1.7%, chiefly due to a larger-than-previously-expected contraction in Ukraine. Read more.