WASHINGTON, April 10 (Reuters) – Ukraine’s economic output is likely to shrink by a staggering 45.1% this year as Russia’s invasion closes business, cuts exports and makes economic activity impossible in much of the country, the World Bank said. Sunday.
The World Bank also predicts that Russia’s GDP in 2022 will fall by 11.2% due to punitive financial sanctions imposed by the United States and its Western allies on Russian banks, state-owned enterprises and other institutions.
The World Bank’s Economic Update “The War in the Region” says the Eastern European region, which includes Ukraine, Belarus and Moldova, is expected to show a 30.7% contraction in GDP this year due to war shocks and trade disruptions.
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Growth in 2022 in the Central European region, including Bulgaria, Croatia, Hungary, Poland and Romania, will be reduced to 3.5% from 4.7% previously due to the influx of refugees, higher commodity prices and deteriorating trust, which hurts demand.
For Ukraine, the World Bank report estimates that more than half of the country’s enterprises are closed, while others operate at well at normal capacity. Ukraine’s closure of Black Sea shipping has cut off about 90% of the country’s grain exports and half of its total exports.
The World Bank has said the war has made economic activity impossible in many areas and disrupts planting and harvesting operations.
Estimates of infrastructure damage in excess of $ 100 billion by early March – about two-thirds of Ukraine’s GDP in 2019 – are rather outdated, “as the war rages and causes further damage.”
The bank said the 45.1% contraction estimate ruled out the impact of destroying physical infrastructure, but said it would affect future economic output, along with the outflow of Ukrainian refugees to other countries.
The World Bank said the scale of Ukraine’s contraction was “subject to a high degree of uncertainty” about the duration and intensity of the war.
A report of a decline in the report, reflecting further fluctuations in commodity prices and a loss of confidence in financial markets caused by the escalation of the war, could lead to a 75% contraction in Ukraine’s GDP and a 20% contraction in Russia’s production.
This scenario would lead to a 9% contraction in the World Bank’s Europe and Central Asia region of emerging markets and emerging economies – more than twice the baseline forecast.
“The Russian invasion has dealt a huge blow to Ukraine’s economy and caused enormous damage to infrastructure,” said Anna Bjerde, vice president of the World Bank for Europe and Central Asia.
“Ukraine needs massive financial support immediately as it struggles to sustain its economy and the government is working to support Ukrainian citizens who are suffering and coping with an extreme situation.
The World Bank has already raised about $ 923 million in loans and grants for Ukraine and is preparing an additional support package of more than $ 2 billion. Read more
“Ambulance assistance from the IMF and the World Bank has allowed Ukraine’s fiscal space to pay salaries to civilians, soldiers, doctors and nurses while meeting its foreign debt obligations,” said US Treasury Secretary Janet Yellen, who oversees the US controlling stake. at the World Bank, he told U.S. lawmakers during a hearing last week.
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Report by David Lauder in Washington; Edited by Matthew Lewis and Stephen Coates
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