Gloomy World Bank forecast: Ukraine’s economic output will be halved

Gloomy World Bank forecast
Economic output in Ukraine halved

In January, the World Bank’s forecast for economic growth in Ukraine was still quite optimistic. At that time, the economists expected an increase of three percent. The attack by Russia changes everything. “Very sobering” are the results of the most recent analysis, they say. But Russia’s economic output will also shrink by double digits.

With the progress of the Russian war of aggression, the World Bank has revised its economic forecast for Ukraine significantly downwards. Economists predicted on Sunday that Ukraine’s gross domestic product would fall by 45.1 percent this year – after a month ago they had assumed a drop of between 10 and 35 percent. The economy of Russia, which is subject to international sanctions, will shrink by 11.2 percent.

“The results of our analysis are very sobering,” said World Bank Vice President for Europe and Central Asia Anna Bjerde. “Our projections show that the Russian invasion of Ukraine has wrecked the region’s recovery from the pandemic.” The “second big shock” hit the economies at a “precarious point in time”.

The Washington-based institution assumes that the emerging and developing countries in the Europe and Central Asia region will shrink by 4.1 percent this year. That’s a drastic reversal from the 3 percent growth forecast before the war and twice as bad as the 2020 recession caused by the pandemic.

The worst affected is Ukraine. Grain exports and other economic activities have “become impossible in large parts of the country due to severe damage to infrastructure,” Bjerde said. This has global consequences: Because of the war, world market prices for grain and energy, where Ukraine and Russia are among the most important exporters, have shot up significantly.

The bank’s forecasts assumed that the war would continue for a few more months. In the event of a significant escalation, Ukraine’s economy could collapse by 75 percent and Russia’s by 20 percent. According to the World Bank, war, flight and expulsion will also multiply poverty in Ukraine. The proportion of the population living on $5.50 a day will rise to 19.8 percent this year, up from 1.8 percent in 2021, according to the World Bank.

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