International Monetary Fund expects record gas and electricity prices in Europe in 2023

The International Monetary Fund report says Europe will be able to weather next winter thanks to accumulated fuel stocks, but risks again facing record prices for natural gas and electricity.

The International Monetary Fund notes that by mid-September 2022, Russian gas supplies to Europe fell by 80% year-on-year, and exports to Bulgaria, Denmark, Finland, Germany, Lithuania, the Netherlands and Poland stopped altogether.

At the same time, the Fund’s experts base their expectations on the fact that sufficient reserves have been accumulated for the winter, but they also allow an emergency scenario of a combination of abnormally cold weather with a complete cessation of gas supplies from Russia. In this case, according to their estimates, the Europeans will have to look for the possibility of reducing fuel consumption by 6%, which for the most vulnerable countries is fraught with a loss of about 3% of GDP compared to the baseline forecast.

The report says: “But even if accumulated natural gas reserves allow Europe to weather the winter of 2022-2023, the region will try to replenish stocks in the spring. With modest or completely absent Russian supplies, this could lead to a return of the market in 2023 to record high prices. on natural gas and electricity, which were in 2022. It was also reported that higher energy prices are expected to increase the cost of living in Europe in 2022 and 2023 by 7% and 9%, respectively.

The International Monetary Fund believes that inflation in advanced European economies will be 8.3% in 2022, and will slow to 6.2% in 2023.

The report says that prices in Eastern Europe, excluding the parties to the conflict and Turkey, will increase by 13.3% and 11.8% in 2022 and 2023, respectively.

Western countries are facing high energy prices and high inflation due to the imposition of sanctions against Moscow and the policy of ditching Russian fuel. Against the backdrop of rising prices for fuel, especially for gas, the European industry has largely lost its competitive advantages, which also affected other sectors of the economy.

The United States and European countries also faced record inflation, which has not been recorded for decades.

Source: RIA Novosti