Bank of Spain predicts EU GDP may drop 4.2%

A prospective suspension in Russian energy imports would have a negative short-term economic impact, weakening the European Union’s gross domestic product by 2.5 percent to 4.2 percent, Spain’s central bank said on Tuesday.

In an analytical assessment, the Bank of Spain stated that the expected impact in the first year of trade suspension should decrease over time, owing to Europe’s improving adaptability in substituting Russian goods.

Due to their larger reliance on Russian energy imports, the economic impact would be substantially bigger in the three major euro area economies – Germany, Italy, and France – as well as in Eastern European countries, according to the analysis.

According to Javier Quintana, a research economist at the Bank of Spain, Germany’s activity would decline by 1.9 percent to 3.4 percent of GDP, Italy’s by 2.3 percent to 3.9 percent, France’s by 1.2 percent to 2%, and Spain’s by 0.8 percent to 1.4 percent.

On Monday, European Union leaders agreed in principle to slash 90 percent of Russia’s oil imports by the end of the year.