![]() But some countries in Eastern and Central Europe, like Estonia and Lithuania, are much more affected. Exports to those countries accounted for only 1.1% of gross domestic product (GDP) in 2019. Firms located in countries close to Ukraine, such as Poland, Latvia and Lithuania, are also hard hit, as are firms in Greece, Croatia and Spain.ĮU firms as a whole are only minimally exposed to the disruption in exports to Ukraine, Russia and Belarus. ![]() Firms in sectors like transport, chemicals and pharmaceuticals, and food and agriculture suffer the most. The share of firms that risk defaulting on their debt also surges from 10% to 17% in the same period. Under our model, the share of EU firms losing money rises from the normal average of 8% to 15% in the year after the start of the invasion. Exports to Ukraine, Russia and Belarus are completely suspended.Firms absorbed those higher costs by reducing their profit, instead of increasing prices for their own products.Firms’ energy bills doubled for at least one year.We created a model with several assumptions: The European Investment Bank Economics Department analysed the war’s impact on the profitability of EU firms. Now these firms are contending with higher energy prices, reduced trade and potentially higher funding costs as banks try to avoid risk. Those firms were slowly weaning themselves off government support when the Ukraine war hit. The COVID-19 crisis weakened EU firms, particularly small ones.
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