Macroeconomic Effects of the Trade Conflict Between the EU and Russia

The current trade conflict between the EU and Russia, which is a consequence of the political destabilisation in Eastern Unkraine, could have a sizeable impact on the Austrian economy, on account of the high importance of the exports to Russia. These macroeconomic effects are not limited to individual commodities which are affected by sanctions but are a result of a general worsening of trade relations between the EU and Russia. Under the assumption of an only temporary reduction of exports and tourism revenues (extrapolated from the actual losses of all EU countries in the first half of 2014, no further reduction of consumption and investments) this would result in losses of 9,000 jobs and 0,6 billion € in gross value added. A long-run reduction in export- and tourism demand (additional reductions in consumption and investments) would reduce employment by 24,000 persons and gross value added by 1.5 billion €. A further deepening of this conflict (increasing export reductions by a quarter over the current value) would cause a loss of 45,000 jobs and of 3.9 billion € in gross value added for Austria.