World Bank: Ukrainian economy expected to halve this year due to war
April 10 (UPI) — Ukraine’s economy is set to shrink by nearly half this year, according to World Bank forecasts, as Russia’s invasion of the Eastern European nation raises fears of a sharp global slowdown as countries continue to grapple with the economic fallout from the COVID-19 pandemic.
In a report on Sunday, the global lender to low- and middle-income economies said it expects Ukraine’s output to decline by 45.1% this year, although “the scale of the contraction will depend on the duration and intensity of the war”.
If the war ends soon, economic recovery can be launched and losses contained, he said, adding that a protracted war, however, “could increase human and economic costs, increase political uncertainty, fragment the regional integration and disrupt essential trade and investment links”.
Russia invaded Ukraine on February 24, causing widespread destruction of infrastructure and the death of more than 1,760 civilians, including 4.5 million forced to flee their country and 7.1 million internally displaced, according to United Nations data.
The war has drawn swift condemnation from democratic nations and their harsh punitive sanctions, which have already weighed on Moscow’s economy.
According to the report, the Russian economy has entered “a deep recession” with output expected to fall by 11.2% this year.
A downside scenario in the report, however, predicts that Russia’s gross domestic product will contract by 20% this year and Ukraine’s will shrink by 75%.
For Europe and Central Asia as a region, the war erased a 3% growth projection, with the regional economy now on course to shrink by 4.1%, according to the report, as the war is exacerbating the economic effects of the COVID-19 pandemic. .
“ECA’s neighboring countries are at risk of significant economic damage due to their strong trade, financial and migration ties with Russia and Ukraine,” the report said.
Energy and wheat are of particular concern, with Russia being a major exporter of energy, particularly to Europe, and the warring nations together considered the breadbasket of the world as they produce between 25% and 30 % of world grain exports.
Late last month, the UN’s World Food Program warned that the conflict could create a global food insecurity crisis, with the two countries also producing 20% of the world’s maze and 80% of its sunflower oil while the WFP buys 50% of its cereals from Ukraine. many countries depend on it for their wheat supply.
The cost of grain has already soared and could soar higher, as well as for other crops, as Ukrainian farmers trade their hoes for weapons and shelling destroys nearby fields and shipping lanes, like the one that crosses the sea Black, which carries 90% of grain exports from Ukraine.
The report says that although the two nations only account for less than 3% of global exports, the war and ensuing sanctions have weakened supply chain routes while increasing shipping and insurance costs. .
Supply shortages and rising energy and food prices will fuel inflation, he said, affecting not only neighboring countries but the rest of the world.
“The war in Ukraine and the pandemic have once again shown that crises can cause widespread economic damage and roll back years of per capita income and development gains,” said Asli Demirguc-Kunt, chief economist of the World Bank for Europe and Central Asia, in a press release. .
