WASHINGTON, April 10 – Ukraine’s economic output is likely to shrink by a staggering 45.1% this year as Russia’s invasion has closed businesses, cut exports and made economic activity impossible in much of the country, the World Bank said on Sunday in a new report.
The World Bank also forecasts that Russia’s GDP output will fall by 11.2% in 2022 due to financial sanctions imposed by the United States and its Western allies on Russia’s banks, state-owned companies and other institutions.
The World Bank’s “War in the Region” economic update says the Eastern Europe region, made up of Ukraine, Belarus and Moldova, is forecast to contract a 30.7% GDP this year due to shocks from the war and trade disruptions.
Growth in the Central Europe region, which includes Bulgaria, Croatia, Hungary, Poland and Romania, is expected to slow to 3.5% in 2022 from a previous 4.7% due to the influx of refugees, higher commodity prices and falling confidence affecting demand % decrease.
For Ukraine, the World Bank report estimates that more than half of the country’s businesses are closed, while other businesses that are still open are operating well below normal capacity. The closure of Black Sea shipping from Ukraine cut off about 90% of the country’s grain exports and half of its total exports.
The World Bank said the war has made economic activity impossible in large parts of the country and disrupted agricultural planting and harvesting operations.
Estimates of infrastructure damage of over $100 billion by early March – about two-thirds of Ukraine’s GDP in 2019 – are far out of date “as the war has raged on and caused more damage”.
The bank said the 45.1% contraction estimate excludes the impact of the destruction of physical infrastructure, but said it would hurt future economic output along with the exodus of Ukrainian refugees to other countries.
The World Bank said the extent of Ukraine’s contraction came with “a high degree of uncertainty” about the duration and intensity of the war.
“The Russian invasion has dealt a severe blow to Ukraine’s economy and has caused enormous damage to infrastructure,” Anna Bjerde, World Bank vice president for Europe and Central Asia, said in a statement. “Ukraine needs massive financial support immediately as it struggles to keep its economy running and the government is running to support Ukrainian citizens who are suffering and coping with an extreme situation.”
The World Bank has already put together about $923 million in loans and grants for Ukraine and is preparing another aid package worth more than $2 billion. Read more The aid has helped Ukraine pay salaries for essential workers and make pension and government debt payments despite drastically reduced tax revenues, World Bank officials said.
Reporting by David Lawder in Washington Editing by Matthew Lewis