Ukraine’s economic output is expected to contract by at least 10% this year, according to the International Monetary Fund, as the Russian invasion causes widespread destruction.
In an updated report, completed on March 7 and released on Monday, the IMF warned that Ukraine will face a “deep recession” this year, as growth prospects deteriorate by at least 13.5 percentage points. compared to pre-war estimates and that real gross domestic product fell by 10 percent.
The fund expects the economic impact of the war to be “immediate and severe”, with consumption limited to “basic needs” given the influx of refugees, large-scale destruction of infrastructure keys and other supply disruptions. Inflation, which is already running at an annual rate of 10% in January, is expected to worsen.
Prior to the Russian attacks, Ukraine had fiscal financing needs of around $19.5 billion and relied heavily on domestic sources. The IMF now predicts the deficit will widen to around 3% of GDP and once official support is taken into account – including the $1.4 billion “fast financing” of the fund agreed last week – the country will cope. to a budget deficit of $7.4 billion.
New issuances of war bonds (which Ukraine has already used to finance its armed forces) and “large-scale mobilization” of new financing from multilateral entities, on concessional terms, will be needed to fill the void. , the IMF said. Funding estimates are a “bare minimum”.
The new forecast broadly assumes a “rapid resolution” of the conflict with “substantial” economic support provided by the official sector, and is therefore subject to “massive uncertainty”.
“A growing loss of physical capital stock and massive migration would lead to a much more pronounced contraction in output, a collapse in trade flows, an even smaller capacity to collect taxes, and a greater deterioration in fiscal and external positions,” indicates the report.