The European continent, historically no stranger to conflict, finds itself grappling with yet another set of economic repercussions - this time stemming from the war in Ukraine. A recent study by the Swiss National Bank, published on Friday, paints a concerning picture of the economic fallout of the conflict in Eastern Europe.
Ever since Russia's aggressive move into Ukraine in February 2022, Europe has been jolted by a surge in energy prices and bouts of financial market turbulence. A marked contraction of both the Russian and Ukrainian economies has added to the region's woes.
But, as the study suggests, the implications go far beyond these immediate challenges. The research closely examines the economic performance of five major European nations: Germany, Great Britain, France, Italy, and Switzerland.
Had Russia not initiated its assault on Kiev, the output for these nations would have seen an uptick between 0.1% and 0.7% in the fourth quarter of 2022 alone. To compound this, inflation rates in these countries would have remained between 0.2% and 0.4% lower.
The war's chilling ripple effects are evident.
Germany: The Hardest Hit
Germany, Europe's largest economy, has borne the brunt of this conflict's economic aftermath. German GDP in the last quarter of 2022 would have been richer by 0.7%, and inflation would have been curtailed by 0.4%, if not for the tensions in Eastern Europe.
The geographical proximity and intricate economic ties with Russia and Ukraine have placed Germany in the line of fire, economically speaking. However, the specter of the war's implications goes beyond mere economic metrics.
As the study poignantly points out, "The negative consequences of the war are likely to be far greater in the medium-to-long term, especially with regard to the real economy." By their estimates, the long-term impact could potentially be twice as profound in the coming one to two years.
As Europe finds itself geographically closer to this conflict than previous wars, its nations have had to navigate additional challenges, such as the influx of refugees and escalating defense expenditures.