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The conflict in Ukraine has entered its 53rd day and an end to the violence seems a long way off. In an interview with Bild am Sonntag, EU Commission President Ursula von der Leyen confided: “We have to be prepared for the fact that, in the worst case, the war can last months, even years.” economy of many countries will have.
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 the UPB underlined a period of tension in trade relations and on the raw materials markets will open up, with inevitable repercussions on an economy as dependent on foreign countries as Italy’s”.
Stagflactive effects when normalization is delayed
“The basic scenario of the forecast of the Def reads a passage from memory that the President of the UPB Lilia Cavallari during her hearing on the document of Thursday 14 Economy and Finance faces in a relatively short time a solution to the conflict that is currently however, appears very uncertain. If the conflict lasted through the entire second quarter and the normalization process covered the second half of the current year, the stagflationary economic impact (ie the simultaneous presence of inflationary waves and stagnation, editor’s note) would become more evident.
Risk of further contraction of GDP this year
Specifically, “Using the Oxford Economics international macroeconometric model, the UPB simulated the impact of a onequarter conflict; The considered transmission channels are consumer and business confidence, interest rates, commodity prices and the crisis of the Russian economy ». Well, “based on the exercise conducted, the longer duration of the conflict compared to the growth revision already priced in would entail a further contraction in GDP this year, but also with a drag on the next.”
The Italian economy has been hit hardest by this shock
Again: “The Italian economy would be the hardest hit by this shock and GDP would suffer an additional fall of about a percentage point and a half over the two years as a whole. At the same time, consumer prices would increase more significantly, in the case of Italy by about 2.5 percentage points cumulatively in 202223.