WASHINGTON (Reuters) – Ukraine’s economy is estimated to shrink by 10 percent this year following Russia’s invasion, but the outlook could worsen significantly if the conflict between the two countries drags on, announced the International Monetary Fund (IMF) in a report published on Monday.
Prepared before the green light from the IMF for emergency aid of 1.4 billion dollars (1.27 billion euros) for Ukraine, the report of the international organization indicates that the contraction of the Ukraine could be much more important, in the order of 25% to 35%, based on the data relating to the conflicts in Iraq, Lebanon and other countries at war.
Ukraine’s economy grew by 3.4% in 2021, the state statistics service said on Thursday.
The IMF report, dated March 7, says Ukraine has an external financing gap of $4.8 billion when its needs are expected to jump.
The country’s public debt is expected to reach 60% of GDP in 2022 from around 50% in 2021, according to the IMF.
“The team expects growth prospects to deteriorate by at least 13.5 percentage points from a pre-war scenario, with gross domestic product (GDP) falling 10% this year, assuming a quick resolution of the conflict and substantial donor support,” the report read.
By comparison, Ukraine’s economy contracted 6.6% in 2014 – the year Russia annexed Crimea – and just under 10% in 2015.
IMF staff said there was great uncertainty about the outlook given the intensity of the conflict and warned that large refugee flows in particular could lead to “a significantly more pronounced contraction of the economy”, a collapsing trade flows and declining tax revenues.
(Report Andrea Shalal and David Lawder in Washington, Natalia Zinets in Lviv, French version Laetitia Volga, edited by Jean-Michel Bélot)
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