The war will reduce Ukraine’s GDP by more than 45%, according to World Bank forecasts
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WASHINGTON, April 10 (Reuters) – Ukraine’s economic output is expected to contract 45.1% this year as the Russian invasion shuttered businesses, slashed exports and made economic activity impossible in large swathes of the country. country, the World Bank said on Sunday.
The World Bank also predicts that Russia’s GDP output 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 “War in the Region” economic update says the Eastern Europe region, comprising Ukraine, Belarus and Moldova, is expected to post a GDP contraction of 30.7 % this year, due to war shocks and trade disruption.
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Growth in 2022 in the Central European region, comprising Bulgaria, Croatia, Hungary, Poland and Romania, will be reduced to 3.5% from 4.7% previously due to the influx of refugees , the rise in commodity prices and the deterioration in confidence which is hurting demand.
For Ukraine, the World Bank report estimates that more than half of businesses in the country are closed, while others are operating well below normal capacity. The closure of Black Sea shipping from Ukraine has 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 many areas and is disrupting agricultural planting and harvesting operations.
Estimates of infrastructure damage exceeding $100 billion at the start of March – about two-thirds of Ukraine’s GDP in 2019 – are well exceeded “as the war raged and caused further damage”.
The bank said the 45.1% contraction estimate excludes the impact of the destruction of physical infrastructure, but said it would affect future economic output, as well as the outflow of Ukrainian refugees to other places. country.
The World Bank said the extent of Ukraine’s contraction is “subject to a high degree of uncertainty” about the duration and intensity of the war.
A downside scenario in the report, reflecting further shocks to commodity prices and a loss of financial market confidence triggered by an escalation in the war, could lead to a 75% contraction in Ukraine’s GDP and a 20% contraction in Russian production.
This scenario would lead to a 9% contraction in the World Bank’s Europe and Central Asia region of emerging and developing economies, more than double the decline in the baseline forecast.
“The Russian invasion is a severe blow to Ukraine’s economy and has inflicted 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 going and the government operating to support the suffering Ukrainian citizens facing an dire situation.”
The World Bank has already mobilized about $923 million in loans and grants for Ukraine and is preparing a new support program of more than $2 billion. Read more
“Rapid assistance from the IMF and the World Bank gave Ukraine fiscal space to pay the salaries of civilians, soldiers, doctors and nurses, while meeting its foreign debt,” said US Treasury Secretary Janet Yellen, who oversees the US controlling stake in the World Bank. , told US lawmakers during a hearing last week.
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Reporting by David Lawder in Washington; Editing by Matthew Lewis and Stephen Coates
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