It is becoming increasingly evident that the Russian economy is going to take a very hard hit from the ongoing Ukrainian-Russian crisis - mostly due to the substantial capital outflows from Russia, but also due to the tightening of monetary conditions in Russia as a result of heavy intervention in the currency markets by the Russian central bank to prop up the Russian rouble.
However, the wider European economy is also being affected negatively. While we believe that the overall negative impact on the European economy is relatively small - so far - there are major difference between the EU countries.
To assess how vulnerable different EU countries are to the crisis, we have constructed a Russia/Ukraine 'vulnerability' index.
The index focuses on the impact on three factors which can affect the growth and financial outlook for different EU countries. First, we look at the dependence on gas and energy imports from Russia. This is very important for countries such as the Baltic countries, which import all their gas from Russia. Second, we look at how much each country exports to Russia (and Ukraine) and how important this is for each economy. Finally, we look at how much of the total consumption basket is food and energy. Hence, food and energy prices are particularly sensitive to the crisis - due to uncertainties about Russian energy exports and due to uncertainties about Ukrainian corn and wheat exports.
Read in our EMEA Weekly which countries are most vulnerable to the Ukraine-Russia crisis.
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