According to a report released by Accenture, the supply chain challenges arising from the COVID-19 pandemic and Russia’s invasion of Ukraine could result in a potential €920 billion cumulative loss to gross domestic product (GDP) across the Eurozone by 2023.
The potential loss equates to 7.7% of the Eurozone GDP in 2023.
The report, “From Disruption to Reinvention – The future of supply chains in Europe”, was published at the World Economic Forum’s Annual Meeting in Davos, explores three possible scenarios for how the war could play out over the coming year, modelling the impact of each scenario on the Eurozone region in terms of costs and timelines for recovery.
Supply chain disruption related to COVID-19 cost Eurozone economies €112.7 billion in lost GDP in 2021, according to the report. The lack of material supplies, breakdowns in logistics and inflationary pressures, even though that was before the Russia- Ukraine war, were already undermining the economic rebound in Europe, with resurging demand and precautionary hoarding overwhelming supply chains. With Russia’s invasion of Ukraine, the situation has become even more dire.
Take the example of semiconductor, the semiconductor shortfall was expected to resolve in the second half of 2022, is now anticipated to persist into 2023. A protracted war could lead to a further loss to GDP of up to €318 billion in 2022 and €602 billion in 2023, while inflation could be as high as 7.8% in 2022 before declining in 2023.
“Although expert consensus is that Europe will avoid recession this year, the combination of COVID-19 and the war in Ukraine has the potential to significantly impact Europe’s economy, causing a material deceleration in growth,” said Jean-Marc Ollagnier, CEO of Accenture in Europe.
“While before the war some kind of supply chain normalization was expected in the second half of 2022, we now don’t expect this to happen before 2023, perhaps not even until 2024, depending on how the war evolves.”
Solving supply chain issues will be critical to European competitiveness and growth. According to the report, up to 30% of total Eurozone value-added relies on functioning cross-border supply chains, either as a source of input or as a destination for production.