The World Bank predicts a 45% drop in Ukraine’s GDP and an 11% contraction in the Russian economy – Invasion of Ukraine

The World Bank predicts a 45% drop in Ukraine’s GDP and an 11% contraction in the Russian economy – Invasion of Ukraine

Ukraine’s GDP will fall by 45.1% this year, while Russia’s will fall by 11.2%, according to the latest forecasts from the Washington-based institution.

For Ukraine, the scenario is much worse than the 10% to 35% projected a month ago by the International Monetary Fund (IMF), or the 20% announced on March 31 by the European Bank for Reconstruction and Development (EBRD).

The entire region suffers from the economic consequences of the war, which began on February 24 and has already caused more than four million Ukrainians to flee to Poland, Romania and Moldova, as well as soaring grain and energy prices.

The World Bank expects GDP to contract by 4.1% this year in all emerging and developing countries in Europe and Central Asia, compared with 3% growth before the war. Much worse scenario than the recession caused by the COVID-19 pandemic in 2020 (-1.9%).

Eastern Europe alone is expected to see a GDP decline of 30.7% compared to the 1.4% growth projected before the invasion.

“The results of our analysis are very bleak,” Anna Byrdie, the World Bank’s vice president in charge of the region, said on a conference call.

He noted that “this is the second major shock to the regional economy in two years and comes at a very unstable time, with many economies still struggling to recover from the pandemic.”

The report’s authors point out that Moldova is also likely to be one of the countries hardest hit by the conflict, not only because of its geographic proximity to the war but also because of its inherent weaknesses as a small economy closely linked to both Ukraine and Russia.

Moreover, this part of Europe depends on natural gas for its energy needs.

For the World Bank, the bleakest outlook is even for Ukraine, given lower tax revenues, business closures, trade affected, and grain exports nearly impossible in large parts of the country.

The increase in poverty is also expected to be felt, with the proportion of people living on US$5.5 a day rising from 1.8% in 2021 to 19.8% this year, according to World Bank calculations.

To make the forecast, the bank assumed that the war would last “a few more months.” He admits that they are subject to “great uncertainty” about the real impact of the war on the eurozone.