Ukraine economy could shrink by up to 35% in 2022, says IMF

 
INA-sources
 
Ukraine’s war-ravaged economy could shrink by up to 35% this year if Russia’s invasion becomes a protracted conflict, the International Monetary Fund has warned.
 
In an initial assessment, the IMF said the loss of life, damage to critical infrastructure, trade disruption and an outflow of refugees would lead to gross domestic product falling by a minimum of 10% in 2021.
 
The IMF also said the war – which has already led to a sharp rise in energy prices – would cause “devastating” damage to the global economy.
Last week, the IMF announced a $1.4bn package of emergency financial support to help the country cope with the growing financial costs of a war that has resulted in almost half the banks shutting and the central bank struggling to deliver cash to branches and ATMs.
 
“While geopolitical tensions with Russia had already curtailed Ukraine’s access to markets, the escalation to an invasion of Ukraine by Russia and full-blown war on 24 February has dramatically altered Ukraine’s outlook,” a report prepared by IMF staff said.
 
Air and seaports had been closed, and substantial damage had been incurred at Mariupol (through which 50% of total exports are shipped) and a majority of the airports. A large number of roads and bridges had been destroyed, further crippling transportation and logistics.
The IMF admitted there was “massive uncertainty” about the economic effects of the war but said instead of forecasting 3.5% growth this year it now expected a deep recession. The prediction of a 10% fall in GDP was based on a prompt end to the fighting and financial help from donor bodies.
 
“However, the intensity of the ongoing conflict is causing widespread destruction to Ukraine’s productive capacity and rapidly worsening the outlook. Increasing loss of physical capital stock and mass migration would result in a significantly more pronounced output contraction, a collapse in trade flows, further diminished tax collection capacity, and a greater deterioration in the fiscal and external positions.
 
The IMF estimates Russia will also suffer a deep recession and will provide an estimate of the hit to output in its world economic outlook due out next month.
 
Source: The Guardian