The World Bank says Ukraine’s economy will shrink by 45.1 per cent this year as a result of the Russian invasion.
It has been more than a month since the war broke out in Ukraine, leaving scores dead and many homeless.
The bank also forecasted that emerging markets and developing countries in the Europe and Central Asia region would contract by 4.1 per cent this year, compared with the pre-war forecast of 3 per cent growth, as the economic shocks from the war compound the ongoing impacts of the COVID-19 pandemic.
The Bretton Woods institution issued the fresh projection in its latest economic update for the region, released on Sunday.
According to the bank, Russia’s economy would also be hit hard due to the sanctions imposed on the country.
“Ukraine’s economy is expected to shrink by an estimated 45.1 per cent this year, although the magnitude of the contraction will depend on the duration and intensity of the war,” the report reads.
“Hit by unprecedented sanctions, Russia’s economy has already plunged into a deep recession with output projected to contract by 11.2 per cent in 2022.”
In addition to Russia and Ukraine, Belarus, Kyrgyz Republic, Moldova and Tajikistan are projected to fall into recession this year, while growth projections have been downgraded in all economies due to spillovers from the war, weaker-than-expected growth in the euro area, and commodity, trade and financing shocks.
This, the bank said, is because Russia and Ukraine account for about 40 per cent of wheat imports in the region and about 75 per cent or more in Central Asia and the South Caucasus.
Russia is also a major export destination for many countries, while remittances from Russia are close to 30 per cent of gross domestic product (GDP) in some Central Asian economies (Kyrgyz Republic, Tajikistan).
In her remarks, Anna Bjerde, World Bank vice-president for the Europe and Central Asia region, said, “The magnitude of the humanitarian crisis unleashed by the war is staggering. The Russian invasion is delivering a massive blow to Ukraine’s economy, and it has inflicted enormous damage to infrastructure.”
“Ukraine needs massive financial support immediately as it struggles to keep its economy going and the government running to support Ukrainian citizens who are suffering and coping with an extreme situation.”
Asli Demirgüç-Kunt, World Bank chief economist for Europe and Central Asia, said the Ukraine war and the pandemic have shown that crises can cause widespread economic damage and set back years of per capita income and development gains.
He urged governments in the region to fortify their macroeconomic buffers and the credibility of their policies to contain risks and deal with potential fragmentation of trade and investment channels.
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