International credit rating agency Fitch Ratings has stated that a sudden stop in Russian natural gas supplies to Europe would likely push the euro zone into a recession. An immediate and total cut of Russian natural gas supplies, which is a risk that is rising as the war continues, would result in gas shortages and rationing, causing a major macroeconomic shock, and would be virtually impossible to replace fully in the near term. Moreover, the surge in energy prices in such a scenario would add to inflation pressures.
The EU imports 84 percent of its domestic gas consumption and receives 38 percent of its gas imports from Russia in particular. Fitch estimates that about 30 percent of domestic gas consumption in the EU and the euro zone was supplied by Russia.
The European Central Bank suggests euro zone GDP would fall by 0.7 percent if gas supply declines by 10 percent. A 30 percent loss of gas supply would therefore translate into a two percent decline in euro zone GDP.
Fitch’s March 2022 “Global Economic Outlook” forecasts were for euro zone growth of 2.3 percent in 2023, but recent developments have pointed to downside risks. Gas rationing would likely tip the euro zone into recession in late 2022 or early 2023.