EU countries’ varying degrees of resilience

We look at the magnitude of the fall in activity expected between 2022 and 2023 in the various European Union countries. The largest falls in growth are expected in Italy, the Netherlands, Portugal, Austria, Poland, Slovenia and Hungary; growth is expected to fall the least in Germany, Finland, Sweden, Slovakia, the Czech Republic and Bulgaria. We try to explain the different magnitudes of the fall in expected growth between 2022 and 2023 by: The size of industry (which is more affected by supply chain problems ); The dependence on Russian natural gas; The degree of wage-price indexation; The extent of fiscal stimulus. We find that these variables, which intuitively ought to play an important role in explaining the resilience of countries’ growth in the current environment, have no explanatory power when it comes to the expected change in these countries’ growth between 2022 and 2023. This is troublesome. The only explanation for the change in growth between 2022 and 2023 is the degree of underemployment in 2022.