How does the war affect the economies of Ukraine and Russia?

Scenes of ruins in the town of Borodianka northwest of the Ukrainian capital Kyiv on April 8 afp

Reuters news agency on April 11. World Bank (World Bank) forecasts that Ukraine’s economy will shrink by 45.1% this year due to Russian military campaign causing many businesses to close, exports to fall and economic activity to stagnate in many parts of the country.

In addition, the World Bank also forecasts that Russia’s GDP this year will decrease by 11.2% due to Western financial sanctions targeting banks, state enterprises and other establishments.

Regional GDP Eastern Europe including Ukraine, Belarus and Moldova are forecast to decline by 30.7% this year due to the impact of the campaign military Russia and trade was disrupted.

In the Central European region including Bulgaria, Croatia, Hungary, Poland and Romania, economic growth will slow to 3.5% from 4.7% previously, due to the influx of refugees, commodity prices. Rising and eroding confidence affect consumption demand.

With Ukraine, the World Bank report estimates that more than half of businesses across the country have closed, while the rest are also not operating as before.

The closure of cargo ships from Ukraine in the Black Sea has cut about 90% of grain exports and half of the country’s total exports. The war also affected farming and harvesting in many parts of the country.

The estimate of infrastructure damage in excess of $100 billion, accounting for about two-thirds of Ukraine’s GDP in 2019, given as of early March, has become outdated due to continued hostilities and additional damage.

The World Bank said that the forecast for Ukraine’s economy to shrink 45.1% does not include the impact of damaged infrastructure and this will affect the economy in the future, in addition to the flow of refugees to other countries.

“Ukraine needs immediate major financial support while it is looking to sustain its economy and the government is racing to support its people who are suffering and cope with the difficult situation,” said Anna Bjerde, vice-president. World Bank in Europe and Central Asia.

The World Bank has provided loans and grants of about $923 million to Ukraine and is preparing a support package of more than $2 billion.

This support helps Ukraine pay wages for workers in essential sectors, pensions and foreign debt, amid a sharp drop in tax revenue, according to World Bank leaders.