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How can key sectors of the Greek economy be affected by dramatic developments in Ukraine. OT authors analyze - What teachers predict

Anna Dollari
17 Mar 2022,



There will be a cost to invading Europe economies and Greek without yet being able to calculate the exact burden - although shock prices in energy and commodities have already shrunk incomes. The financial staff is talking about the consequences for the number of economic growth, with loss of wealth, in inflation, mainly through energy products, which are increasing every day. There will be possible costs in tourism, direct and indirect and milder will be the characteristics regarding the balance, ie imports, exports or foreign direct investment.


Among the key macroeconomic risks, international analysts still point to a possible new mutation in the virus that could affect tourism and mobility. The focus is also on energy. According to UBS, Greece supplies 20% of the oil it imports from Russia and about 32% of its natural gas. Rising gas and wholesale electricity prices have resulted in electricity and gas prices for households contributing 2,2% and 0,3% respectively to the January consumer price index which rose to 5,5 % annually. However, Russian tourism accounted for only 0,8% of foreign tourist arrivals in 2021.

The bells for uncertain developments also rang in the Commission, which issued guidelines on fiscal policy in 2023, which will be revised in the spring, in the light of developments surrounding Russia's war in Ukraine and the rise in prices. The high level of uncertainty surrounds the economies, and leaves the window open for fiscal flexibility in 2023, as it is still unknown how long the sanctions will last. This can be seen from the statements of both the Vice-President of the Commission Valdis Dobrovskis and the Commissioner for Economic Affairs P. Gentiloni. Dobrowski stressed that this is a difficult period for the European economy and our workers. Inevitably, our sanctions will have a negative impact on the economy. Gentiloni said that thanks to our common policy response, our economies have been able to cope with the storm caused by the pandemic, and this new crisis requires equally close coordination of our economic and fiscal decisions. Uncertainty and risks have increased significantly, and that is why our guidelines should be updated as needed, in the spring at the latest.



Mines in the foundations of the economy

Given the developments, it seems uncertain whether the basic scenario for the 2022 recovery will be repeated. The forecast shows a rate of 4,5% while the jump in inflation and energy prices burdens the inflation outlook. In the unfavorable scenario of the state budget, the reduction of the nominal rate will be by 1% in 2022 to 3,5%. Given the developments, a more extreme scenario is not ruled out. 

Ukraine3  4 1


Electricity: The price of electricity more than doubled in 8 days

In the day ahead market of the Hellenic Energy Exchange, the average price of wholesale electricity for tomorrow increased by 28,56% compared to today, resulting in a jump of 362,22 to 24 euros / MWh. In a period of eight days , and specifically since February 106, when Russia invaded Ukraine, the average price of wholesale electricity increased by XNUMX%, demonstrating the liquidity of the situation in the energy market but also the inability to predict the course of costs and effects.

According to market participants, the price explosion for tomorrow is not only attributed to the effects that the "Ukrainian" has caused on the energy market but also to the energy mix as it has been formed. RES, which reduce the effects of price increases, have a stake, due to unfavorable weather conditions, by only 16,25% for the production of the quantities of electricity that will be required tomorrow. On the contrary, the most expensive natural gas participates with 53,68%.


Inflation is high in 30 years - prices have escaped


The Organization for Economic Co-operation and Development (OECD) has announced that inflation in its member countries rose to 7,2% in January 2022, from 6,6% in December 2021 and just 1,6% in January 2021, reaching higher than in February 1991. With the exception of Turkey, inflation in the OECD region increased to 5,8%, after 5,5% in December 2021. Annual inflation in the G20 region also increased in January 2022, reaching 6,5% compared to 6,1% in December 2021.


They broke the brakes on liquid fuel prices

With inflation now threatening to spiral out of control and reach 5,8% in the Eurozone in February on an annual basis from 5,1% a month earlier (in Greece to 6,3%), the situation is even more speculative. difficult. Households and businesses are already facing high cost of living and production respectively. Fears for the immediate future are also greater, as there is now a risk that new increases will be passed on to consumers, especially in fuel and food.


Fire in ferry ticket prices

Ο Financial Postman presents a revealing table based on data from Trading Economics, which show the large increases in energy, food, raw materials and industrial materials that have been recorded in the last week after the dramatic events, but also in the horizon of month and year. The examples are indicative and cause great concern. After the invasion of Ukraine, the price of Brent oil jumped over $ 110 a barrel, recording a more or less 22% increase in a single week, raising the increase to a 12-month horizon to 75%. Natural gas jumping up to 80% within a week (!) Is increased by almost 1.000% from last year at such a time. However, in the natural gas lately the fluctuations are continuous and very intense as Russia is one of the main suppliers of Europe. 




Banks: The duration of the crisis in Ukraine will determine the cost


Greek banks are called upon to face a more intense and seemingly longer-lasting macroeconomic turmoil after the Russian invasion of Ukraine. "The rise in inflationary pressures and their impact on household and corporate incomes seems inevitable," bank sources said. Therefore, the same circles note, "the new turmoil will affect the ability to open exposures to borrowers. In addition, the climate of uncertainty that has developed will make those who plan to invest in the domestic market more cautious. "


Tourism: The Russian tourism market is disappearing


It will take years for Russian tourists to come to Greece again, while the week we are going through is also very critical for the course of bookings from the markets of the rest of Europe. Our country expected to receive more than 250.000 Russian tourists this year, and up to 350.000 if the issues with charter flights were resolved, but due to the war, everything has been turned upside down. The assessment of factors of the Greek-Russian tourism business is that the closed air borders as well as the sanctions will last very long regardless of when the fire will be extinguished in Ukraine, with the result that the Russian tourist is lost for years from our country. However, the gap, due to their small number, although they spend proportionally more than other tourists, can be filled by other "sources" provided of course that the crisis will not be prolonged for a long time.


The closure of factories and the anxiety about raw materials

Flour and steelmakers are initially working on alternative plans for the supply of raw materials beyond the countries involved in the conflict, while companies that maintain production facilities, or commercial offices to promote their products, put the safety of their employees first. Of course, exporters with trade relations with the two countries, as well as representatives of the tourism industry, are also concerned. Today in Ukraine, according to the Office of Economic and Commercial Affairs in Kyiv, are active in 45 Greek companies, concentrated mainly in Odessa, Kyiv, Kharkiv and Lviv. These companies are mainly active in the field of food, fruit and vegetable trade, selection of staff for Greek shipping, consulting services, tourism and catering.

The "account" of sanctions in Russia: Winners and losers

Concerns that the heavy sanctions, which have been imposed on Russia will affect significant and European economic interests, have already begun and are reflected on the stock exchanges. Banks lost big, especially after Russia's exclusion from the SWIFT system, with Credit Suisse talking about the possibility of seeing situations analogous to those caused by the collapse of Lehman Brothers. It is estimated that due to SWIFT many traders will not fulfill their obligations and will cause overdrafts which, in order to be covered, the Central Banks - and especially the Fed, if Russia's international transactions are made in dollars - will have to intervene by throwing dollars at Buy.

The war in Ukraine energizes Greek construction


Professors Pantelis Kostis (Assistant Professor of EKPA) and Panagiotis Petrakis (Emeritus Professor of EKPA) write in the Economic Post about the new developments in Energy, Prices and the Russian invasion of Ukraine.

Recent unfortunate developments in Russia-Ukraine relations have clearly increased the risks and uncertainty.

One of the most important mechanisms of transmission of the consequences of the invasion of Ukraine is through higher gas prices. In fact, Europe was already facing a major energy crisis characterized by historically low gas reserves, with Russia being the main supplier of energy to Europe.

Of course, the immediate response of gas prices to the escalation of the conflict so far is considered moderate, with prices rising by about 10%, which is within the range of prices observed so far for 2022 (Chart 1). Of course, the rise is not insignificant, especially compared to the low price levels before the pandemic, the levels on which many industries had based their investment plans.



Chart 1. Gas price (USD / MBTU)  - Source Oxford Economics


The immediate impact of the invasion on Ukraine seems to have been mitigated by improved storage levels due to higher LNG imports and lower demand. A) expectations of only limited US and EU sanctions on Russia, as well as (b) the low risk of Russia halting conventional long-term gas deliveries through existing pipelines, and (c) transit, also played a role in mitigating the effects. winter's.
Higher gas prices will add more momentum to inflationary pressures in Europe (Charts 2 and 3). Oxford Economics (with which we work) estimates that if gas prices are 20% higher than expected (an additional 10% increase over the increase already), this could increase Eurozone inflation by 0,2, 3,9 percentage points above the initial forecast of 2022% due to higher gas and electricity prices. This would limit the expected recovery in consumer spending for XNUMX, as it would mean a decline in real household incomes.



Chart 2. Inflation (annual percentage change in prices,%) Source: Oxford Economics - Global Economic Model.



Chart 3. Harmonized Energy Consumer Ratio (HICP) (2015 = 100)  - Source: Oxford Economics - Global Economic Model.


Chart 4 shows the evolution of gas, oil and coal prices in Greece as well as estimates for their evolution until 2024. The increase in gas prices should be expected to continue until the summer. In the future, however, a significant reduction is foreseen.



Chart 4. Domestic gas, oil and coal price indices in Greece (2010 = 100) 


photo: https://pixabay.com/el/ 


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Anna Dollari

Anna Dollari


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