The economy today
Eastern Europe hit hard by war in Ukraine
Audio 03:57
A woman pushes a stroller filled with groceries at the border between Ukraine and Romania, March 23, 2022. REUTERS - CLODAGH KILCOYNE
By: Dominique Baillard Follow
4 mins
Close-up on the economy of the countries bordering Ukraine, the most exposed to the war.
And therefore the first to suffer the economic repercussions.
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Firstly because they massively welcome the millions of Ukrainians fleeing the fighting.
Among the 4.6 million refugees listed by the UNHCR, more than half passed through Poland and a very large majority of them are still there.
Romania, Moldova, Hungary and Slovakia also host several hundred thousand Ukrainians.
These countries must receive European aid to meet this burden, an envelope of 20 billion euros has been released by Brussels.
But this sudden increase in the population residing at home puts pressure on the demand for housing, food and energy.
So many products that are already more and more expensive because of the surge in raw materials.
Among the member countries of the European Union, inflation is already above the 10% mark
+10% in Romania and Poland, +12.7% in the Czech Republic.
Unheard of for 15 to 20 years.
It is mainly energy prices that are rising, followed by those of food, and this is a burden for households.
Heating and refueling absorbs a quarter of income in Eastern Europe, compared to 8-9% on average in France.
The surge in prices has already contaminated that of wages, they have increased by 13% in Hungary where inflation is at 8.5%.
In these countries that are not members of the euro zone, central bankers have already raised rates sharply without managing to stem this price tsunami for the time being.
Are Eastern European countries suffering from trade disruptions with Russia?
The impact is moderate because their trade with Russia has fallen sharply.
They had skyrocketed from the 2000s. But since 2014, the year of the invasion of Crimea and the European embargo against Russia, they have plummeted.
Exports from new EU members to the former Soviet big brother are now less than 3%.
Their trade is rather oriented towards Germany, which outsources a large part of its industrial activity to them.
Their Achilles' heel is intermediate products from Russia.
They represent up to 25% of Bulgaria's needs, for example.
And of course it's gas.
Because most of these countries are still very dependent on Russian gas
Russia supplies 100% of the gas consumed in the Czech Republic, 95% in Hungary, a country where this source of supply is critical since gas represents a third of its energy mix.
It is 85% for Slovakia where gas covers a quarter of energy consumption.
If the embargo on Russian gas were to be decided by the Twenty-Seven, it would be very expensive for all these countries.
Some of them are ready to take on the burden.
Slovakia and the Czech Republic are preparing for this, recognizing that it will not happen overnight.
Poland wants to turn the page as soon as possible.
It plans to give up coal and then gas and Russian oil by the end of the year.
A position based on a policy of diversification implemented before the conflict in Ukraine.
On the other hand, for the Hungary of the populist Viktor Orban, the friend of Vladimir Putin, it is a red line which remains impassable.
► IN BRIEF
French growth revised downwards because of the war in Ukraine
According to the Banque de France, growth will slow to 0.25% in the first quarter, half of its previous forecast.
It is the automotive industry that is suffering the most, its supplies have been very affected by the conflict in Ukraine.
The 4% annual growth promised by Bercy at the start of the year now seems out of reach.
All of our daily, live coverage of the war in Ukraine.
© FMM Graphic Studio
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