Romania, Hungary and the Czech Republic are the European economies most vulnerable to a new rise in energy prices, according to the latest EY European Economic Outlook.
“Our analysis shows that Europe is more vulnerable to a renewed increase in energy prices than other major economies, in particular the US. In the event of another spike in energy costs, the most adversely impacted European economies would include Romania, Hungary and Czechia” the analysis read.
“It is essential to remember that the energy crisis and many other disturbances, including those driven by changes in the geopolitical landscape, are not transitory shocks. We should get used to an extended period of uncertainty and volatility. It is crucial for businesses and policymakers to remain vigilant and be prepared for any further risks to materialize” is adds.
While EY forecasts inflation in Europe to fall relatively quickly during the course of 2023, in annual average terms, it will remain elevated. Persistent elevated inflation would squeeze household budgets for longer and weigh on private consumption. Adding to woes, the recent turmoil in the banking system, beginning with the failures of some US banks, is a new cause for concern. Geopolitical tensions, including the war in Ukraine, continue to be a key risk. Elevated debt levels increase vulnerability, especially of emerging markets and developing economies, to potential financial market turbulence, EY concludes.
