The impact of high natural gas prices on Greece’s trade balance will be more severe than the oil shocks of 1974 and 1979 and the trade deficit will increase by at least 4.3% of GDP, making Greece one of of the most vulnerable countries in the European Union, according to a study by London-based research firm Capital Economics.
Other EU members will also be heavily affected, the report says, noting that the two oil shocks of the 1970s were followed by a recession.
Domestic gas futures (also known as TTF for Title Transfer Facility) in Europe have gone from €20 per megawatt-hour before the Covid-19 pandemic to €280/MWh currently, a 14-fold increase. For comparison, the price of Brent crude oil tripled in the first oil shock and doubled in the second.
To determine the magnitude of the shock of natural gas on the trade balance of each country, the research firm took into account the energy mix – oil and gas – used by the countries studied and the fact that some are producers, and not importers. , one and/or or the other. It also based its scenario on an average gas price of €200/MWh for 2022.
The research focused on seven eurozone countries – Austria, France, Germany, Greece, Italy, the Netherlands and Spain – adding Canada, the UK and the United States. He concludes that Greece and Italy will suffer the biggest impact on their trade balances, much bigger than during the two oil shocks.
Among the countries studied, the impact of oil shocks on the trade balance varied from 1.6% to 2.8% of GDP.
The impact of rising gas prices will range from 1.9% in France to 4.4% in Italy, placing Greece in second place among the most vulnerable economies.
Only France and the Netherlands will manage to contain the damage to levels better than in the 1970s, and that assuming that the study’s gas price estimate is correct.
The first oil shock had widened Greece’s trade deficit by nearly 2% of GDP and the second by 2.5%.
Capital Economics warns that the final impact could be even higher, as gas price hikes have exceeded all assumptions. At current levels, and assuming no further increases, the impact would be 25% greater.