Experts see risk – gas stop: consumption should fall by a quarter

The IHS experts devote a special chapter to the impact of the war in Ukraine and the gas crisis in their medium-term forecast, presented at a press conference on Thursday. Central statement: A cessation of Russian gas supply – which is far from averted – would have serious negative consequences for the Austrian economy. “One should at least prepare for a worst-case scenario,” said study group leader Michael Reiter.

The IHS model calculations are based on the assumption that 27 percent of natural gas consumption should be saved between fall 2022 and summer next year, leading to a three percent reduction in GDP. These savings would inevitably also lead to production cuts, even if sufficient gas could be purchased, but at very high prices. “If the gas price stabilizes at just under 300 euros per megawatt hour with an immediate supply stop and this price is really passed on to the end user, then this 27 percent saving would only come,” explains Reiter. .

“Save gas where you can”
Savings in households and electricity generation would increase the amount of gas available to industry and thus support GDP. The economic researchers assume that the existing gas will be efficiently distributed between the economic sectors through a price mechanism, which the IHS economists say is “the top priority for economic policy”. “I think the motto is to save gas where possible,” said Reiter.

In order to support households and companies suffering from the explosion in energy prices, the government should buy gas in reserve, so that tax profits can be made if European gas prices continue to rise, is the recommendation.

Criticism of measures in Lower Austria
IHS boss Klaus Neusser is critical of the Lower Austrian state government’s cut in the electricity price. “I live in Lower Austria and I am happy to be able to enjoy this cap as well. You can already see how socially accurate the measure is,” he said sarcastically. In addition, many private households are not aware that the measure is not a “price cap”, warned economist Reiter. Only a relatively small amount of electricity is subsidized, but the electricity consumption above that can get very expensive.

High energy prices are also fueling inflation, which is set to decline only slightly in the coming months. According to IHS calculations, this has increased to an average of 7.5 percent for the current year. In the coming year, crude oil prices should no longer be a price-driving effect and supply chain problems should also ease – but inflation is likely to remain high at 4.75 percent. Only in the following years, until 2026, will it probably fall to 2.25 percent. “That doesn’t mean prices are falling, it just means prices are rising less quickly,” Hofer said.

slowed economic growth
High inflation is slowing the domestic economy’s catching up process after the corona crisis. The IHS expects an average economic growth of 1.8 percent for the years 2022 to 2026. However, this relatively strong growth is mainly due to 2022 with a growth of 3.8 percent, “driven by the catching-up process after the Corona crisis,” according to IHS forecast manager Helmut Hofer. Thereafter, smaller increases to 1.4 percent are expected – economic output should therefore increase at the same pace as in the euro area, say IHS economists. The unemployment rate should therefore be around six percent in the same forecast period.