Europe is reportedly at risk of entering a recession as a result of rising oil and gas costs and concerns that Russia may entirely cut off supply, as per economists studying the market conditions.
As per Nomura, a Japanese investment bank that has substantial operations in London, a number of factors will have a negative impact on Europe's economy, including declining demand in the US, its largest export market, ongoing fallout from the Russia-Ukraine war, as well as related increases in energy and food prices.
Nomura predicted that the European economy would start shrinking in the last two quarters of 2022 and experience a recession that would last until the summer of 2023, resulting in a total of 1.7% drop in the GDP.
Energy prices had already increased in the second half of 2021 as major economies lifted lockdowns due to Covid-19, but the Ukraine war has made matters more difficult as the EU, UK, and US have worked to economically exclude Russia from the rest of the world.
Europe still significantly relies on Russia for its energy needs, and in response to the sanctions, Russian President Vladimir Putin has slowed gas exports.
Russia has stopped supplying gas to Bulgaria and Germany through the TurkStream pipeline as well as Nord Stream 1 pipeline, and to Poland through the Yamal pipeline.
In June, the eurozone's annual inflation rate was 8.6%, the highest since the bloc's establishment in 1999.
Due to Russia's hold over the Nord Stream 1 pipeline, Germany, Europe's largest economy, is especially at risk. The pipeline will be shut down for ten days starting on July 11 to perform anticipated yearly maintenance.
Robert Habeck, German Economy Minister, stated that the pipeline will be shut down for ten days starting July 11 to perform anticipated yearly maintenance. The government anticipated that Russia might refuse to restart the pipeline, which could result in winter shortages.
European nations that rely on Russian gas are scrambling to find alternative sources.
Although the UK does not buy gas directly from Russia, European shortages might nevertheless worsen the issue caused by rising gas prices on open markets.
Source credit: https://www.theguardian.com/business/2022/jul/04/europe-recession-risk-russia-gas-supplies