World Bank: Ukraine’s GDP will plunge 45.1% this year

The World Bank on Sunday issued catastrophic economic forecasts for Ukraine due to the Russian invasion, which has an impact on the entire region, while warning that the scenario will be even darker if the armed conflict is prolonged.

Ukraine’s Gross National Product (GDP) will plunge 45.1% this year, while Russia’s will fall by 11.2%, according to the latest estimates from the Washington institution.

This is a much worse forecast than the one made a month ago by the International Monetary Fund (IMF), which is expected to shrink from 10% to 35%, or the 20% forecast by the European Bank for Reconstruction and Development on 31 March ( EBRD).

The whole region is suffering economic consequences due to the war that started on February 24, causing the flight of more than 4 million Ukrainians to Poland, Romania and Moldova and rising grain and energy prices.

PT forecasts a 4.1% contraction in GDP this year in all emerging and developing countries of Europe and Central Asia, while before the armed conflict broke out it expected growth of 3%. It will be a recession worse than the one caused by the pandemic of the new coronavirus in 2020 (-1.9%).

Only Eastern Europe is expected to see its GDP collapse (-30.7%), whereas before the war began it was projected to grow at a rate of 1.4%.

According to the World Bank, Moldova is expected to be one of the countries hardest hit by the war, not only because of its proximity, but also because it has inherent vulnerabilities because it has an economy closely linked to both. war parts. After all, all of Eastern Europe is highly dependent on Russian gas.

The worst prospects are for Ukraine, not only because its tax revenues are collapsing, businesses are completely or partially closed, and trade and supply are in huge trouble, but also because grain exports are impossible from much of the country. of major infrastructure damage “.

Concerns are being raised in the International Development Organization and the rise in poverty. The percentage of the population living on $ 5.50 a day is expected to increase from 1.8% in 2021 to 19.8% this year, according to World Bank estimates.

The bank bases all these calculations on the assumption that the war will continue for “a few more months”. He acknowledged, however, that there was “great uncertainty” about the duration of the conflict and its impact on the eurozone.

It has drawn up an even more pessimistic scenario, which predicts a greater impact on the eurozone, escalation of sanctions, a shock to confidence …

The region’s GDP in this case will shrink by 9%, well over 5% during the 2009 financial crisis and the 2% recession due to the pandemic. In Russia, the shrinkage will reach 20%; in Ukraine, 75%, in the worst case scenario.

SOURCE: AMPE