Russian energy import stop could cost Germany up to 3% of GDP -economists

Industrial facilities of the PCK Raffinerie oil refinery in Schwedt/Oder
FILE PHOTO: A chimney emits fire at the PCK Raffinerie oil refinery in Schwedt/Oder, Germany, March 7, 2022. REUTERS/Hannibal Hanschke

March 14, 2022

BERLIN (Reuters) – A halt to Russian energy imports could cost Germany up to 3% of its gross domestic product (GDP) in the short term, estimates by the EconPol Europe network based on a simulation showed.

“The cost of stopping energy imports would be significant, considering that the coronavirus pandemic cost about 4.5% in economic output,” said Andreas Peichl, head of the Ifo Center for Macroeconomics and Surveys, on Monday.

Larger economic slumps and upheavals could not be ruled out either, he added, as the strength of the potential shock entailed high uncertainties for the modelling.

In addition, he said, it must be taken into account that large parts of the industry have not yet recovered from the effects of the pandemic.

Oil and coal could be replaced by imports from other countries, but gas would not be so easy, the authors wrote.

“Germany should reduce its dependence on Russian gas quickly and decisively,” said Karen Pittel, head of the Ifo Center for Energy, Climate and Resources.

First and foremost, she said, policy measures should aim to increase incentives to replace and conserve fossil fuel as quickly as possible, even if an embargo is not imminent.

($1 = 0.9131 euros)

(Reporting by Rene Wagner; Writing by Miranda Murray)