Global Outlook: Europe’s energy crunch

In EIU’s latest global outlook video, global forecasting director Agathe Demarais and principal economist Emily Mansfield discuss Europe’s energy crunch, taking a look at which EU countries will be hit the hardest by gas shortages over the coming winter season.

One of the countries most likely to see gas shortages is Germany, due to its high dependency on Russian gas and limited options to get supplies from elsewhere. Austria will be just as badly affected and Italy could also run short, despite diversifying its supply to Algeria. However, the biggest EIU forecast downgrades are to central European countries like the Czech Republic and Slovakia. These markets will face a triple shock: energy shortages, inflation and spillover effects from the recession in Germany.

Surging inflation across the euro zone in recent months is also not being felt equally. The cost of living crisis will be most acutely felt in economies with energy-intensive industrial sectors, such as Bulgaria, and countries where households spend a large share of their income on energy, such as the Baltic states. Policy responses by governments in the region are a further contributing factor.

“Countries where a price cap has been in place for a while have much lower energy prices and so inflation. But this is a poisoned chalice: keeping energy costs down reduces the incentive to cut usage, and we really do need gas use to fall to get through this winter.”

EMILY MANSFIELD, PRINCIPAL ECONOMIST, EIU.

Learn more about Europe’s energy crunch with EIU Viewpoint, our new analysis service. EIU Viewpoint provides unmatched global insights for nearly 200 countries, six industries and 25 critical commodities, helping organisations identify prospective opportunities and potential risks.