Ukraine’s economy could shrink by a third this year: IMF
- Ukraine’s economic outlook has turned dire since Russia invaded in late February.
- The International Monetary Fund estimates that the Ukrainian economy could contract by up to 35%.
- The economic repercussions of the conflict are being felt globally.
The Russian invasion of Ukraine has sent shockwaves around the world – and Ukraine’s economic prospects are dire.
A new report from the International Monetary Fund explains what this economic impact could look like.
The IMF said that Ukraine “is on the verge of a deep
This year. The country’s economy could see a contraction of 25% to 35% – an estimate based on contractions seen during the war in countries like Iraq and Syria. Even in the best-case scenario, economic output will fall by 10% – “assuming a rapid resolution of the war and substantial donor support. »
Economic forecasting is always a rough science at the best of times, and wartime conditions make those numbers even rougher than usual. The report stresses that “the situation remains extremely fluid”, and that any forecast is therefore always “subject to massive uncertainty”.
The Russian invasion has already taken a heavy economic, physical and emotional toll on Ukraine. The UN estimates that more than 3 million Ukrainians have fled the country since the Russian invasion on February 24. Kyiv Mayor Vitali Klitschko said the capital was in a “dangerous moment”. according to the BBCas the attacks continue.
On the ground, the Red Cross said people in Mariupol, Ukraine, were attacking each other for food. The besieged city buried its dead in mass graves, according to the Associated press.
As the IMF points out, the financial shock of the crisis comes against a backdrop of soaring inflation and the spread of the Omicron variant.
According to the IMF, Ukrainians may also face difficulties in obtaining money. While payment systems in Ukraine were still operational as of March 2, the National Bank of Ukraine’s ability to get money to banks and ATMs has been disrupted by the conflict, with half of branches banks being “closed to protect the safety of staff and customers”.
Russian civilians have also felt the economic impact of the ongoing conflict. President Vladimir Putin’s decision to invade Ukraine – and subsequent Western sanctions – led ordinary Russians to see the value of the ruble tumble as they scramble to withdraw foreign currency. This has disrupted Russia’s economic recovery, with the country potentially falling into recession as early as April.
Countries other than Russia and Ukraine are also feeling the economic repercussions of the conflict. Gas prices in the United States soared to a record high as already rising costs were only made worse by the conflict. President Joe Biden has also banned Russian energy imports, which include oil and natural gas.
And both Ukraine and Russia play a key role in the global food supply chain, with both producing together almost a third of the world’s wheat. As Insider’s Jason Lalljee reports, the conflict could destabilize the global food supply chain and send prices skyrocketing – a phenomenon that has already led to civil unrest.