Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Wiener Institut für Internationale Wirtschaftsvergleiche The Vienna Institute for International Economic Studies www.wiiw.ac.at Economic Consequences of the Ukraine Conflict 13 October 2014 Peter Havlik, Vasily Astrov The Vienna Institute for International Economic Studies (wiiw) 2 Outline Consequences for Ukraine Consequences for Russia Consequences for the EU Sanctions and their impacts Wiener Institut für Internationale Wirtschaftsvergleiche The Vienna Institute for International Economic Studies www.wiiw.ac.at Consequences for Ukraine 4 Gross regional product 2012, in % of total Crimea & Sevastopol: 3.8 the role of Crimea is modest but Donbass: Donbass: 15.7 – 16% of Ukraine’s GDP – 6.5 million population – home to coal-mining and metallurgy Rest of Ukraine: 80.5 Source: wiiw based on national statistics. 5 Foreign trade by region 2013, in % of total Imports of goods Exports of goods Crimea & Sevastopol Donbass Rest of Ukraine Crimea & Sevastopol 1.6 Donbass Rest of Ukraine 1.5 7.7 25.2 73.2 90.8 Source: wiiw based on national statistics. 6 GDP per capita, EUR at PPP, 2012 Ukrainian average: EUR 6,800 Luhansk Kyiv Donetsk Crimea Sevastopol Source: wiiw based on national statistics. 7 Economic costs of the war in Donbass Economic damage currently estimated at USD 7-8 billion (6% of GDP) Industrial production in August 2014 dropped by 60% in Donetsk and 85% in Luhansk (year-on-year) largely on account of power cuts and railway disruptions Over 1 million refugees including some 320 thousand to other regions of Ukraine and nearly 900 thousand to Russia may undermine long-term recovery prospects 8 Economic prospects This year: 8-10% GDP recession Exports dynamics in January-July 2014 – war-related destructions in Donbass % change year-on-year – restrictions on military and dual-use goods exports to Russia – inflation erodes purchasing power – investments collapse 20,0 15,0 10,0 5,0 0,0 -5,0 -10,0 Prospects for stabilisation highly uncertain -15,0 – conflict settlement crucial -30,0 -20,0 -25,0 EU Russia Rest of the world Total Wiener Institut für Internationale Wirtschaftsvergleiche The Vienna Institute for International Economic Studies www.wiiw.ac.at Consequences for Russia 16 GDP growth: current (realistic) scenario; contributions of main components to GDP growth, in pp 15 Private consumption State consumption Net exports GDP growth, in % (rhs) Gross capital formation Costs of the conflict: about 1% of GDP in 2014 (close to EUR 20 billion), due to lower GDP growth (-1 pp), falling investments (-6 pp) compared to the pre-conflict scenario 15 8,5 10 7,2 10 7,3 5,1 5 8,2 6,4 10 5,3 4,3 4,7 3,4 4,5 5 1,3 0,5 1,3 1,9 2,0 0 0 -5 -5 -10 -7,8 -10 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: wiiw Annual Database, national statistics, own estimates. 17 Russia was ‘stuck in transition’, economy close to stagnation already before Ukraine crisis. Key challenges (old and new): Energy exports and growth sustainability - Increased pressures on energy supply diversification (both in the EU and RU) - Sectoral sanctions already start to bite, no longer largely symbolic - Investment climate already suffers, imports and FDI down, capital flight Diversification and modernisation of the economy under threat - Growing reform pressures owing to sanctions? - Yet modernisation is more difficult without more FDI! Stability of the ruling elite - Putin’s ratings grow, Russia’s ratings fall, rouble and MICEX fluctuate - Yet this may change with more hardship … Integration on the post-Soviet space derailed/fails? - Crimea not really helpful for Putin’s Eurasia integration project - New design/reset of EU neighbourhood policies? Wiener Institut für Internationale Wirtschaftsvergleiche The Vienna Institute for International Economic Studies Consequences for the EU www.wiiw.ac.at 23 Share of Russia in EU goods exports, in % of total, 2013 20 18 NMS, FI, DE, AT, IT more exposed than others 16 14 12 10 8 6 4 2 0 Source. wiiw Annual Database, EU Comext. 24 Share of goods exports to Russia in % of GDP, 2013 15 12 Baltics, SK, SI, CZ, FI, HU, RS, PL are more exposed than others; AT: 1.4% 9 6 3 0 Source: wiiw Annual Database, EU Comext. 25 Share of domestic value added of exports to Russia in % of GDP, 2013 (estimated) 5 4 Baltics, SK, SI, BG, PL, CZ, FI, HU, DE are more exposed than others; LT, EE, SK, LV net exports to Russia are more than 2% of GDP (AT: 0.6%) 3 2 1 0 Source: EU Comext, WIOD, own estimates. 27 Scenario (Ia): estimated loss of GDP (in %) if domestic value added of exports to Russia drops by 10% 0,0 -0,1 -0,1 -0,2 -0,2 -0,3 -0,3 -0,4 -0,4 Baltics, SK, BG, PL, CZ, FI, HU, DE most exposed; Lithuania would lose 0.4% of GDP, Austria 0.06% of GDP -0,5 Source. Own estimates based on wiiw Annual Database, EU Comext. 29 Scenario (IIa): estimated loss of GDP (in %) if domestic value added of exports to Russia drops by 50% 0,0 -0,5 -1,0 -1,5 Baltics, SK, BG, PL, CZ, FI, HU, DE more exposed than others; Lithuania would lose up to 2% of GDP -2,0 -2,5 Source: Own estimates based on WIOD Database, EU Comext. 30 EU export exposure to Russia: 5 key industries and 12 major exporting countries, EUR mn, 2013 25000 AT CZ DE EE FI HR HU LT LV PL SI SK 20000 15000 10000 EU28 5000 0 CB Textiles, apparel, leather, related products CF Pharmaceuticals, medicinal chem & botan.products Source. wiiw Annual Database, EU Comext. CJ Electrical equipment CK Machinery and equipment n.e.c. CL Transport equipment 31 Share of Russia in goods imports, in % of total, 2013 30 Energy accounts for 80% of EU imports from Russia 25 20 15 10 5 0 Source: wiiw Annual Database, EU Comext. 32 EU import exposure to Russia: 5 key industries and 12 major importing countries, EUR mn, 2013 140000 EU28 AT CZ DE EE FI HR HU LT LV PL NL SK 120000 100000 80000 60000 40000 20000 0 B Mining and quarrying CD Coke and refined CE Chemicals and CH Basic metals, CC Wood and paper petroleum products chemical products fabricated met.prod., ex mach.& equip. Oil and gas: Austria, Germany and the Netherlands estimated. Source: wiiw Annual Database, EU Comext. 38 Scenario (II): estimated GDP loss (in %) if exports (both goods and services) to Russia drop by 50% 0,0 -1,0 -2,0 -3,0 -4,0 -5,0 -6,0 -7,0 -8,0 Baltics, Cyprus, SK, FI, SI, CZ more exposed than others; Lithuania would lose nearly 9% of GDP -9,0 Source. Own estimates based on wiiw Annual Database, EU Comext. 40 Scenario (I): estimated GDP loss (in %) if domestic value added of goods and services exports to Russia drops by 10% 0,0 -0,2 -0,4 -0,6 -0,8 -1,0 Cyprus, Baltics, BG, SK, FI, PL, CZ would lose most; Cyprus would lose more than 1% of GDP -1,2 Source. Own estimates based on wiiw Annual Database, EU Comext. 41 Estimated GDP loss (in %) resulting from Russia’s August 2014 food import ban 0,0 -0,1 -0,1 -0,2 -0,2 -0,3 -0,3 -0,4 -0,4 -0,5 -0,5 Lithuania could lose about 2.6% of GDP Source. Own estimates based on wiiw Annual Database, (http://ec.europa.eu/agriculture/statistics/trade/2012/annex4 en.pdf). Wiener Institut für Internationale Wirtschaftsvergleiche The Vienna Institute for International Economic Studies Sanctions and their impacts www.wiiw.ac.at 45 Western sanctions and their impacts (I) Sanctions unlikely to have desired effects – whatever these might be (change Russian behaviour?) But sanctions still painful for all sides (UA, RU, EU) Russia retaliates, some EU countries suffer more Russian investment and GDP growth down Import substitution and export diversion Capital flight, exchange rate fluctuation and inflation Russia turning inwards and even more assertive? Greater medium-term reform pressures? 46 Western sanctions and their impacts (II) Eurasian integration derailed? Lasting damage to East-West relations Serious medium- and long-term repercussions on Russian growth, living standards and stability Trade and energy supplies diversification Russian modernisation hampered without more FDI, technology imports and better East-West relations What about Ukraine, Crimea and Novorossia? Sanctions’ effectivenness versus impact 57 Thank your for your attention! 58 Country codes AT Austria IE BE Belgium IT Ireland Italy BG Bulgaria LT Lithuania CY Cyprus LU Luxembourg CZ Czech Republic LV Latvia DE Germany MT Malta DK Denmark NL Netherlands EE Estonia PL Poland ES Spain PT Portugal FI Finland RO Romania FR France RS Serbia GB Great Britain SE Sweden GR Greece SI Slovenia HR Croatia SK Slovakia HU Hungary NMS New Member States RoW Rest of the World