Ukraine’s economy could shrink by more than a third this year if the war with Russia continues, the International Monetary Fund has said.
The global credit organization said the country is already facing a 10% drop due to the invasion that has hit major cities, destroyed airports and sparked a refugee crisis.
The IMF recently sent $1.4 billion in emergency funds to Ukraine — the maximum allowed under its rules.
More billions are needed, it said.
The bleak economic outlook for Ukraine was included in a report prepared before the emergency loan was approved last week. The estimates were calculated by looking at wartime economies in countries like Lebanon, Iraq and Syria.
“With the ongoing war, the situation remains extremely volatile and any forecast is subject to massive uncertainty at this point,” said the report, which predicts the economy could contract by 25% to 35%.
The estimates in the report should be “considered the absolute minimum”.
In 2014 and 2015, Ukraine also suffered an economic shock when production fell by 6.6% and 10% respectively following Russia’s annexation of Crimea.
But Ukraine’s heavily export-dependent economy grew 3% last year, boosted by a record grain harvest. Production growth of a further 3.6% was expected for 2022.
Now the IMF said: “A deep recession and high reconstruction costs are to be expected against the backdrop of a humanitarian crisis.”
According to the March 7 report, the government has prioritized defense and social spending for the time being and has remained on track on its external debt obligations. Businesses are still paying taxes and money is still flowing through the financial system, even though many bank branches have been closed and authorities have had to take emergency measures.
The country is likely to face more problems, the report warned.
The IMF plans to set up tools to help its members send money to help Ukraine, which has already spent the equivalent of $1.4 billion servicing and paying off the government’s foreign debt since the war began, IMF said -Representative.
In an interview with the BBC, Ukraine’s central bank head Kyrylo Shevchenko said Russian assets frozen abroad due to sanctions should be used to rebuild the country.
“The need for money will be enormous,” he told the BBC. “It could be met through loans and grants from multinational organizations and direct help from other countries. However, much of the funding must be obtained in redress from the aggressor, including funds currently frozen in our allied countries.”
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