Ukraine’s economic output is likely to contract by a staggering 45.1 per cent this year as Russia’s invasion has shuttered businesses, slashed exports and rendered economic activity impossible in large swathes of the country.
In a new report released on Sunday, the World Bank also forecast Russia’s 2022 gross domestic product output to fall 11.2 per cent due to punishing financial sanctions imposed by the United States and its Western allies on Russia’s banks, state-owned enterprises and other institutions.
The World Bank’s War in the Region economic update said the eastern Europe region – comprising Ukraine, Belarus and Moldova – is forecast to show a GDP contraction of 30.7 per cent this year, due to shocks from the war and disruption of trade.
Growth in 2022 in the central Europe region – comprising Bulgaria, Croatia, Hungary, Poland and Romania – will be cut to 3.5 per cent from 4.7 per cent previously due to the influx of refugees, higher commodity prices and deteriorating confidence hurting demand.
For Ukraine, the World Bank report estimates that more than half of the country’s businesses are closed, while others still open are operating at well below normal capacity.
The closure of Black Sea shipping from Ukraine has cut off some 90 per cent of the country’s grain exports and half of its total exports.
The World Bank said the war has rendered economic activity impossible in large parts of the country, and is disrupting agricultural planting and harvest operations.
Estimates of infrastructure damage exceeding $US100 billion ($A134 billion) by early March – about two-thirds of Ukraine’s 2019 GDP – are well out of date “as the war has raged on and caused further damage”.
The bank said the 45.1 per cent contraction estimate excludes the impact of physical infrastructure destruction, but said this would scar future economic output, along with the outflow of Ukrainian refugees to other countries.
The World Bank said the magnitude of Ukraine’s contraction is “subject to a high degree of uncertainty” over the war’s duration and intensity.
“The Russian invasion is delivering a massive blow to Ukraine’s economy and it has inflicted enormous damage to infrastructure,” Anna Bjerde, the World Bank’s vice president for Europe and Central Asia, said in a statement.
“Ukraine needs massive financial support immediately as it struggles to keep its economy going and the government running to support Ukrainian citizens who are suffering and coping with an extreme situation.”
The World Bank has already marshalled about $US923 million ($A1.2 billion) in loans and grants for Ukraine, and is preparing a further support package of more than $US2 billion ($A2.7 billion).