Here’s how the Russian invasion impacted Ukraine’s economy

New Delhi: It has now been more than 100 days since Russia launched its invasion of Ukraine. As the stalemate in the east of the country persists, with an ongoing battle of attrition, the ripple effect of the war on Ukraine’s economy has been devastating.

In 2021, the International Monetary Fund (IMF) had projected that Ukraine’s per capita GDP would increase by 3.6% this year against the backdrop of the gradual build-up of Russian troops on the country’s border.

Artwork by Prajna Ghosh | The footprint

The World Bank, in a report published in April, predicted that Ukraine’s economy could shrink by up to 45% due to the war, while Russia’s economy is expected to plunge by 11.1% as sanctions bite.

“The war is also hitting emerging and developing economies in Europe and Central Asia hard, a region that was already heading for an economic slowdown this year due to the lingering effects of the pandemic,” the World Bank said in its statements. forecast published on April 10. .

Statement of Economic Losses

Domestic estimates from the Ukrainian Ministry of Economy and the Kyiv School of Economics, estimate the current economic losses at between 564 and 600 billion dollars, or almost four times the country’s annual GDP.

“The scale of the humanitarian crisis triggered by the war is staggering. The Russian invasion is a heavy blow to Ukraine’s economy and has inflicted huge damage to infrastructure,” he added. said Anna Bjerde, World Bank Vice President for Europe and Central Asia, in the report.

“Ukraine needs massive financial support immediately as it struggles to maintain its economy and the government works to support Ukrainian citizens who are suffering and facing an extreme situation,” Bjerde added.

Rising interest rates and inflation

Besides the collapse of the economy, inflation and interest rates have also increased in Ukraine due to the war.

As cited speak FinancialTimesthe last Data on consumer inflation from the National Bank of Ukraine said the rate had climbed to 17% in May, a continuous increase from 16.4% in April13.7% in March10.7% in February before the war.

NBU Governor Kyrylo Shevchenko on Thursday said the board of directors of the country’s central bank has decided to raise its key rate from 10% to 25% in a bid to combat spiraling inflation.

The move will loan extremely expensive in an economy already strained by demand. Bring borrowing costs to their highest level in Europe. And the highest in Ukraine since September 2015 – when Ukraine’s economy was reeling from Russia’s annexation of Crimea.

Explaining the massive rate hike, the National Bank of Ukraine said that “a smaller rise would have had no significant influence on the financial and economic system in wartime due to the probably limited effect on prices actives”.

They further added that a slight rise in rates would also deter investors and encourage depositors to adopt a wait-and-see approach.

Global Tailwinds and the Future of Ukraine’s Economy

Globally, the war in Ukraine is going to have greater impacts on recovery cycles from the shocks of the pandemic.

In April, the World Trade Organization announcement that the war could reduce world economic growth by up to 1.3% and reduce world trade growth from 4.7% to between 2.4 and 3% this year.

So what about Ukraine’s economic future prospects? According to the wall street journalUkrainian Prime Minister Denys Shymhal had said April that his country needed $5 billion a month in budget support until at least September, as well as $600 billion in total for reconstruction efforts.

Despite the importance of mineral raw materials and industrial centers, Ukraine remains above all a agrarian economylabeled Europe’s breadbasket and one of the world’s largest wheat exporters, before its supply chains, like the port of Odessa, were brought to a screeching halt by blockades imposed by Russia during the war.

The main importer, Egypt, was among the countries hard hit by the war and, since February, sought alternatives to Russia and Ukraine for wheat.

Read also : In major defeat, Ukraine loses key rail hub to Russia but counterattacks in Kherson

Christi C. Elwood