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Ukraine’s economy to be almost cut in half, says World Bank

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·Business Reporter, Yahoo Finance UK
·2-min read
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Residents walk along a street near a building destroyed in the course of the Ukraine-Russia conflict
Ukraine’s ports have already suffered a fall in traffic of more than 75%, while the war has also shut half of the country's businesses. Photo: Alexander Ermochenko/Reuters

The World Bank has forecast that both the Russian and Ukrainian economies will sharply shrink this year as a result of the current geopolitical conflict.

Ukraine’s economy is expected to collapse by as much as 45.1% in 2022, worse than the 10% to 35% prediction last month, while Russia’s GDP will decline 11.2%, the bank said.

Ukraine’s economy depends heavily on agriculture, which could be hit further if access to the Black Sea is totally cut off by Moscow.

Ukraine’s ports have already suffered a fall in traffic of more than 75%, while the war has also shut half of the country's businesses.

The Bank added that many surrounding countries will also suffer a larger negative impact as a result of the conflict, with increased western sanctions and a financial shock due to eroding confidence.

Read more: Heathrow records busiest month since start of pandemic

The Eastern Europe region, comprising Ukraine, Belarus and Moldova, is forecast to show a GDP contraction of 30.7% in 2022, due to disruption of trade after two years of the COVID pandemic.

In addition, the Kyrgyz Republic, Moldova and Tajikistan are also projected to fall into recession this year.

“The war is having a devastating impact on human life and causing economic destruction in both countries, and will lead to significant economic losses in the Europe and central Asia region and the rest of the world,” the Washington-based lender said in its forecast.

Both the World Bank and the International Monetary Fund (IMF) will host finance ministers and central bank bosses at their annual spring meetings later this week. They are expected to announce further offers of financial support to countries affected by the invasion.

The bank has sent almost $1bn (£767m) of assistance to Ukraine so far and has promised a further $2bn in the coming months.

Read more: FTSE 100 tumbles as UK economic growth slows

"The magnitude of the humanitarian crisis unleashed by the war is staggering. The Russian invasion is delivering a massive blow to Ukraine’s economy and it has inflicted enormous damage to infrastructure,” Anna Bjerde, World Bank vice president for Europe and Central Asia, said.

“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.

“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.”

Watch: President Biden focuses on Ukraine, economy in State of Union and says we will 'be okay'

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