On Banco de España estimates,3 a hypothetical suspension of energy imports from Russia would have an impact on the EU economy of between 2.5% and 4.2% of GDP in the first year, depending on the assumptions as to European economies’ ability to replace Russian 1  See V. Gunnella, V. Jarvis, R. Morris and M. Tóth (2022), Natural gas dependence and risks to euro area activity, ECB Economic Bulletin, Issue 1/2022. 2  The fact that natural gas can adapt to fluctuations in energy demand makes it a key marginal energy resource in electricity generation. See M. Pacce, I. Sánchez and M. Suárez-Varela (2021), Recent developments in Spanish retail electricity prices: the role played by the cost of CO2 emission allowances and higher gas prices, Banco de España Occasional Paper No 2120. 3  See J. Quintana (2022), “Economic consequences of a hypothetical suspension of Russia-EU trade”, Analytical Articles, Economic Bulletin 2/2022, Banco de España. 1  energy imports. By country, the estimated impact is between 1.9% and 3.4% for Germany, between 1.2% and 2% for France, and between 2.3% and 3.9% for Italy. The estimated impact on the Spanish economy is between 0.8% and 1.4% of GDP. These should be considered short-term impacts, which will lessen as the ability to replace Russian energy imports increases. The latest euro area indicators flag a clear economic worsening, as the effects of the full economic reopening fade These recessionary forces are not yet reflected in the euro area economic data for the first half of the year.
Under this scenario, inflation will be even higher than under the baseline: 6.9% in 2023 and 2.7% in 2024. This highly uncertain setting is also reflected in the dispersion among experts in the oneyear economic outlook for the euro area. This dispersion is very high in the case of GDP – close to the levels observed in the 2008 financial crisis – and stands at all-time highs in the case of the one-year inflation outlook. The ECB continues its monetary policy normalisation, which it began in December 2021 in response to the inflationary episode In view of the growth in inflation, in late 2021 the ECB’s Governing Council embarked on monetary policy normalisation, with the gradual withdrawal of the extraordinary monetary stimulus measures implemented during the pandemic, once these had succeeded in countering the adverse impact of the pandemic on the projected medium-term inflation path. The speed and intensity of this normalisation has been conditioned by the assessment made at each time by the ECB’s Governing Council on the inflation outlook and risks. 4  The measures taken by the ECB in this period are part of the new monetary policy strategy approved in 2021, which established a symmetric medium-term inflation target of 2%. Later I will return to the medium-term orientation and to what it means in practice.