For Russia, the plunge would be 20%. For Ukraine 75%.
The World Bank released poor economic forecasts for Ukraine on Sunday amid the Russian invasion that affects the entire region. And she warned of an even bleaker scenario if the conflict stalls.
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Ukraine’s gross domestic product will fall 45.1% this year, Russia’s 11.2%, according to the latest forecasts from the Washington institution. For Ukraine, this is much worse than the 10% to 35% estimated a month ago by the International Monetary Fund (IMF), or the 20% announced on March 31 by the European Bank for Reconstruction and Development (Bard).
The entire region is suffering the economic consequences of this war, which started on February 24, displaced more than four million Ukrainians to Poland, Romania and Moldova and caused the prices of grains and energy to rise.
The Bank expects a GDP contraction of 4.1% for all emerging and developing countries in Europe and Central Asia this year, compared to a pre-war growth of 3%. This is also much worse than the pandemic-induced recession in 2020 (-1.9%). In Eastern Europe alone, GDP is expected to fall by 30.7%, compared to a projected growth of 1.4% before the invasion.
†The results of our analysis are very grimsaid Anna Bjerde, vice president of the World Bank responsible for this region during a conference call.
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†This is the second major shock to hit the regional economy in two years and it comes at a very precarious time as many economies still struggled to recover from the pandemic.she also noted. As for Eastern Europe, it is also subject to sanctions imposed on Belarus for its role in the war.
Moldova, secondary victim
The report’s authors note that Moldova is thus likely to be one of the countries hardest hit by the conflict, not only because of its geographic proximity to the war, but also because of its inherent vulnerabilities as a small economy closely linked to the two countries, Ukraine and Russia. In addition, this part of Europe is dependent on natural gas for its energy needs.
However, the most bleak outlook is for Ukraine as government tax revenues have dwindled, businesses have closed or are only partially operational and trade in goods is severely disrupted. Grain export has become impossible”in large parts of the country due to heavy damage to infrastructureFor example, Anna Bjerde remarked.
Poverty
Another point of concern, the development agency notes, is the increase in poverty. According to World Bank calculations, the proportion of the population living on $5.50 a day is expected to rise from 1.8% in 2021 to 19.8% this year.
In developing all its forecasts, the Bank has assumed that the war will continue”a number of months“. But she acknowledges that these are subject”to great uncertaintywith an unknown, the real impact of the war in the eurozone.
The institution has therefore also considered a more pessimistic scenario, taking into account a stronger impact on the eurozone, an escalation of sanctions and a shock to financial confidence. The region’s GDP would then contract by almost 9%, much more than the 5% suffered during the global financial crisis of 2009 and more than the 2% recession caused by the pandemic in 2020, the World Bank recalls.
For Russia, the plunge would be 20%. For Ukraine 75%.
