War triggers supply shock
Russian growth forecast lowered significantly
03/31/2022, 09:38 am
The Russian war in Ukraine not only has catastrophic humanitarian consequences – the world economy is also suffering from the Russian invasion. The first growth forecasts since the beginning of the war predict massive economic slumps in Russia and Ukraine.
According to estimates by the European Bank for Reconstruction and Development (EBRD), the Russian economy will shrink by ten percent this year as a result of the Ukraine war. In its forecast, the bank predicts a 20 percent decline in gross domestic product (GDP) for Ukraine. The Russian invasion of the neighboring country, which began five weeks ago, triggered the “biggest supply shock in 50 years,” the EBRD said.
Before the Russian attack on Ukraine, the bank had predicted that Russia’s economy would grow by 3.0 percent this year. For Ukraine, the EBRD had expected growth of 3.5 per cent.
The new growth forecast just released is the first one released by an international financial institution since Russia’s war of aggression began on February 24, according to the bank. In its assessments, however, the EBRD assumes that a ceasefire will be negotiated within a few months and that a “major effort to rebuild Ukraine will begin soon thereafter”.
In such a scenario, according to the bank, the Ukrainian economy could grow by 23 percent next year. However, the Russian economy would remain at zero growth due to the likely continued sanctions. The West has imposed massive financial and economic sanctions on Russia because of the war of aggression.
The EBRD was established in 1991 to support the development of the market economy in Central and Eastern Europe. There are now also projects in the Middle East and North Africa.