ECB's Radev Says Energy Crisis May Spread to Wider Economy

He urged using the current period wisely to prepare, invest in energy efficiency, technology, and more resilient supply chains, and to improve the business environment. The energy crisis sparked by the US war in Iran could spread to the rest of the economy if the conflict continues, European Central Bank Governing Council member Dimitar Radev said. "When external shocks last longer, they rarely remain confined into one sector. What starts with energy can gradually spread through the wider economy," Radev, who is also Bulgaria's central bank chief, said at an event in Sofia on Friday. "That matters for monetary conditions, of course, but it also matters directly for businesses." The conflict launched on Feb. 28 by the US and Israel has sowed anxiety over how badly spiraling energy costs will drive inflation and weigh on economic expansion. Several ECB policymakers have voiced concerns about the likely slowdown of economic growth in Europe. Irish central banker Gabriel Makhlouf said this week that a lengthy war would steer the euro-area economy toward a worse outcome than the ECB's base case economic scenario. His Slovenian and Italian counterparts Primoz Dolenc and Fabio Panetta have also voiced similar concerns. "The current period should be used wisely," Radev said about the Bulgarian economy. "If financing conditions remain relatively favorable for some time, this is an opportunity not only to expand, but to prepare, invest in energy efficiency, technology, in more resilient supply chains, in stronger balance sheets." He said fiscal room is more limited than in the past but the country "still benefits from a relatively low public debt ratio, and that remains an important strength." He urged improving the business environment by reducing administrative burdens, strengthening the rule of law and increasing regulatory predictability.