Russian sanctions seen giving EU 6.7 billion hit in ING estimate
Russia’s ban on imports of western food could cost the European Union an annual 6.7 billion euros ($9 billion) in lost production, according to ING Groep NV.
“The potential effects of the Russian embargo on imports of Western food go far beyond the effects,” of fruit and perishable vegetables, economists including Raoul Leering at Amsterdam-based ING said in a research note. Their calculations, which include the “value added” created by international trade, put the number of jobs at stake at 130,000.
Russia this month announced a one-year ban on a range of food products from the EU and the U.S., in retaliation for sanctions against the country over Ukraine. While the move, which hits products ranging from Gouda cheese to Polish apples, directly affects exporters to Russia, there’s a spillover impact on firms that supply those exporters, according to ING.
The EU sold 1.26 billion euros of fruit and 769 million euros of vegetables to Russia in 2013, trade data from the 28- nation bloc show. The European Commission on Aug. 18 activated emergency support of 125 million euros through November for fruit and vegetable producers.
The loss of Russian business amounts to about 6 percent of EU production and 0.04 percent of gross domestic product, according to ING’s analysis.
Baltics Hit
Germany will suffer the biggest production loss in monetary terms, about 1.3 billion euros. While Poland’s estimated loss is smaller, the potential toll in terms of payrolls is larger, at 23,000. Taking the different economies into account, the Baltic states would be hit hardest. Lithuania could lose 0.4 percent of GDP, Estonia 0.35 percent and Latvia 0.2 percent.
Non-Russian exporting firms will also suffer a fallout from the ban as an excess of supply in the EU depresses prices, while there is the additional loss of exports to Ukraine. The possible downward effect of the crisis also harms the economy. The negative effect could be damped if food producers find new markets.
“On balance the additional effects seem to make the above calculations a conservative estimate of the economic damage that can be caused by the crisis in Ukraine,” ING said.
[Bloomberg]
