Global body expects country’s economy to shrink 10% in 2022
The International Monetary Fund on Monday said Russia’s war on Ukraine has dramatically changed the Ukrainian economy’s outlook, with the global body expecting “a deep recession and large reconstruction costs” amid a humanitarian crisis.
In its latest report on Ukraine, the IMF said Ukraine faces a massive humanitarian and economic shock, with the economy set to experience a deep recession this year.
“This major shock happens against a background of already-high inflation and high gas import prices, the spread of the Omicron (COVID) variant, and the loss of financial market access,” it said.
According to IMF projections, the country’s economy will shrink 10% in 2022, “assuming a prompt resolution of the war and substantial donor support.”
The report noted the ongoing conflict has caused widespread destruction in Ukraine’s productive capacity and rapidly worsened its outlook, adding that the growing loss of physical capital stock and mass migration has led to a significant contraction in production, a collapse in trade flows, and a further reduction in tax-collecting capacity, financial and external. It said this could cause a greater deterioration in positions.
“Data on wartime real GDP contraction(Iraq, Lebanon, Syria, Yemen) suggest that annual output contraction could eventually be much higher, in the range of 25–35%,” it noted.
Pointing out that Ukraine has an urgent balance of payments need arising from the effects of ongoing war, the IMF said the country’s gross external financing needs would amount to $4.8 billion.
Last week the global body approved $1.4 billion in emergency funding for Ukraine amid the ongoing war with Russia.
This figure is equivalent to 50% of Ukraine’s quota in the IMF and will provide critical support in the short term.