This may explain, in part, why the Portuguese economy will be the fastest growing (5.8%) in 2022, and at the same time the country with the lowest inflation rate (4.4%).
In the spring forecast report, the European Commission decided to make a vulnerability matrix of the member states to the consequences of the war in Ukraine, due to the Russian invasion. According to the data in this document, it was possible to conclude that Portugal and Malta are the least exposed countries, while Latvia and Estonia are the two most exposed countries.
It is clear that the Russian invasion in Ukraine affects the European economy more than other large economies, such as the United States and China. However, within the European Union there are very disparate cases, portraying the geographical proximity and the commercial and business connections between the countries.
The channels of transmission of the war's economic impact are trade, raw materials, especially energy, and financial markets. To arrive at a result, the European Commission assessed 13 dimensions of vulnerability, such as energy intensity, dependence on imports originating in Russia, and assets held by Russians.
As one would expect, the Baltic and Central and Eastern European countries are the most vulnerable, mainly because of the high energy intensity of their economies and the importance of Russia in trade, particularly in gas imports.
These are joined by Cyprus because of service exports (tourism) to Russia and the high value of assets held by Russians.
This dependence on Russia is visible when European experts estimate that the European economy will go into recession this year if the European Union decides to cut off Russian gas as a sanction for the invasion in Ukraine.
In a severe scenario, which includes this hypothesis, GDP growth for the year as a whole would be 2.5 percentage points lower than in the baseline scenario (2.7%) and the inflation rate would be three percentage points higher (compared to the current 6.1%).
Among the largest member states, Poland emerges as the most vulnerable country because of the high trade exposure with Russia, as well as the importance of Russian energy in the energy consumption of citizens.
This is followed by the Netherlands (high energy prices), Germany and Italy (both dependent on Russian gas) with exposure in line with the European average. Still in the major economies, France and Spain are among the least exposed.
Portugal and Malta "close the ranking" as the European Union member states least exposed to the effects of war. This may explain, in part, according to the European Commission's forecasts, why the Portuguese economy will grow the most (5.8%) in 2022, and at the same time, the country with the lowest inflation rate (4.4%).
In their analysis of the Portuguese economy, the European experts recognize that the downside risks are more expressive as a result of the Russian invasion in Ukraine. However, "in light of Portugal's low direct exposure to the affected region, the risks are mostly indirect, arising from commodity prices, security of supply and uncertainty about global demand," explains the European Commission.
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