Kyiv, (Business News Report)|| The World Bank has issued a pessimistic forecast for the Ukrainian economy, due to the Russian invasion, warning of a darker scenario if the conflict continues.
The World Bank said in a report that Ukraine’s gross domestic product will fall by 45.1% this year, while it will decline in Russia by 11.2%.
Last month, the International Monetary Fund expected a decline in Ukraine’s GDP by 10-35%, while the European Bank for Reconstruction and Development forecast on March 31, a decrease of 20 percent.
The entire region is suffering from the economic repercussions of this war, which began on February 24 and caused more than four million Ukrainians to flee to Poland, Romania and Moldova, and soared grain and energy prices.
The bank expected a contraction of 4.1% in gross domestic product this year in all emerging and developing countries in Europe and Central Asia, while it expected growth of 3% before the war.
This percentage is much worse than the recession caused by the COVID-19 pandemic in 2020 (-1.9%).
Eastern Europe is expected to see a 30.7% drop in GDP, compared to the pre-invasion forecast of 1.4% growth.
“The results of our analysis are very sobering. Our forecasts show that the Russian invasion in Ukraine has reversed the region’s recovery from the pandemic,” said Anna Bjerde, World Bank vice president for Europe and Central Asia.
“This is the second major shock to hit the regional economy in two years and comes at a very precarious time for the region, as many economies were still struggling to recover from the pandemic,” she told reporters.
The authors of the report believe that Moldova is one of the countries most affected by the conflict, not only because of its geographical proximity to the war zone, but also because of its inherent weaknesses as a small economy and its close association with the two conflict countries, Ukraine and Russia.
The darker outlook remains for the Ukrainian economy, where government tax revenue has shrunk, businesses have closed or are only partially operating and trade is severely disrupted.
Another concern that the World Bank report points to is the increase in poverty in Ukraine. The proportion of the population living on $5.50 per day is expected to rise from 1.8% in 2021 to 19.8% this year, according to World Bank statistics. In making all of its forecasts, the bank assumed that the war would last a few more months.