Daily Management Review

Continuation Of The War Could Shrink Ukraine Economy By As Much As 35%, Warns The IMF


Continuation Of The War Could Shrink Ukraine Economy By As Much As 35%, Warns The IMF
If the war with Russia continues for some more time, the Ukrainian economy could contract by more than a third this year, according to the estimates of the International Monetary Fund.
According to the international financing organisation, the country is already seeing a 10 per cent decline as a result of the invasion, which has wreaked havoc on major cities, wrecked airports, and sparked a refugee crisis.
The IMF just sent Ukraine $1.4 billion in emergency funds, the maximum amount allowed under its terms.
It predicted that billions more will be required.
A report produced before the emergency loan was granted last week featured a grim economic forecast for Ukraine. The figures were derived by examining the economics of countries like Lebanon, Iraq, and Syria during times of war.
"With the war ongoing, the situation remains extremely fluid, and any forecast is at this stage subject to massive uncertainty," the report said, and predicted that a contraction of between 25 per cent and 35 per cent could by witnessed by the company.
It stated that the report's estimations should be "viewed as a bare minimum."
Following Russia's invasion of Crimea in 2014 and 2015, Ukraine experienced economic shocks, with output decreasing by 6.6 per cent and ten percent, respectively.
However, thanks to a record grain crop, Ukraine's economy, which is mainly reliant on exports, grew by 3 per cent last year. In 2022, output was expected to increase by another 3.6 per cent.
Now, the IMF said: "A deep recession and large reconstruction costs are to be expected, on the backdrop of a humanitarian crisis."
According to the 7 March report, the government has prioritised defence and social spending while remaining current on its foreign debt payments. Companies continue to pay taxes, and money continues to flow through the country's financial system, despite the fact that many bank branches have closed and authorities have forced to take emergency measures.
According to the assessment, the country is going to struggle much more.
According to IMF officials, the IMF wants to set up tools to help its members send money to Ukraine, which has already spent the equivalent of $1.4 billion servicing and repaying the government's foreign debt since the beginning of the war.
In an interview with the BBC, Kyrylo Shevchenko, the president of Ukraine's central bank, suggested that Russian assets frozen in foreign nations as a result of sanctions should be utilised to aid the country's reconstruction.
"The need for money will be huge," he told the BBC. "It could be fulfilled through loans and grants from multinational organisations and direct help from other countries. However, a large share of financing is needed to be obtained as a reparation from the aggressor, including funds that are currently frozen in our allied countries."