Ukraine economy to shrink by 45.1% in 2022, Russia's GDP to drop by 11.2%: World Bank

As the Russia- Ukraine war continues to impact the global economy, the World Bank on Sunday issued a forecast predicting the economy of the war-hit country Ukraine will collapse by 45.1% in 2022. The Bank further issued a warning stating a possibility of an even bleaker economic outlook, far worse than the 10-35% downturn the IMF projected last month.

The World Bank said that Russia and its neighboring countries are suffering consequences from the ongoing Ukraine war as Putin's country is likely to see a 11.2% decline in GDP. The war which began on February 24 has caused more than four million Ukrainians to flee to Poland, Romania, and Moldova, further causing the prices of grains and energy to soar.

"The results of our analysis are very sobering. Our forecasts show that the Russian invasion in Ukraine has reversed the region's recovery from the pandemic," said Anna Bjerde, World Bank vice president for Europe and Central Asia.

She further mentioned that the regional economy is facing its second major shock in two years and comes at a crucial time for the region, as many economies are still struggling to recover from the COVID pandemic. 

Washington-based institutions expect 'emerging and developing countries in the Europe and Central Asia region to contract by 4.1% this year, a sharp reversal from the three percent growth projected before the war, and twice as bad as the pandemic-induced recession in 2020'.

Ukraine economy

Ukraine's economy is severely affected due to the shrunken government revenues, businesses, and trade in goods that are badly disrupted. Further, heavy damages to infrastructure have made it hard for grain exports and other economic activities.

The bank's forecasts cautioned that Ukraine is subjected to 'significant uncertainty', assuming the war would continue for a few more months. 

As per the report, "The region's economy would contract by nearly nine percent -- worse than the 2008 global financial crisis - with a 20% decline for Russia and a 75% collapse for Ukraine". 

An increase in poverty in the war-hit country is another cause for concern as the proportion of the population living on $5.50 a day is expected to rise to 19.8% this year from just 1.8% in 2021, according to the World Bank.

Despite avoiding the worst-case scenario, Eastern Europe alone is expected to see its GDP drop by 30.7% rather than grow by 1.4%, as projected before Russia's invasion of Ukraine. The sanctions imposed on Russian ally Belarus for its role in the war have also impacted the region. 

In early March, the International Monetary Fund (IMF) discussed the economic impact of the war in Ukraine, and possible fast-tracked financial assistance for affected countries.

It said in a statement, “While the situation remains highly fluid and the outlook is subject to extraordinary uncertainty, the economic consequences are already very serious".

“The ongoing war and associated sanctions will also have a severe impact on the global economy,” it warned.

(Image: AP)