Russia’s economy will go bad, Ukraine’s worse, Bank of Europe’s figures project

The economies of Russia and Ukraine will shrink by 10 percent and 20 percent respectively in 2022, according to the European Bank for Reconstruction and Development (EBRD).

In its first economic forecast since Russia’s invasion on February 24, the London-based lender warned on Thursday that the war had triggered “the greatest supply shock since at least the early 1970s” and would have a severe effect on economies far beyond the immediate area of the conflict.

The EBRD, issuing emergency forecasts based on a series of assumptions about events in the coming months, said it was the first international financial institution to update its guidance since the outbreak of the war in Ukraine five weeks ago. Previously, it had been expecting growth of 3.5 percent for Ukraine and three percent for Russia.

The latest prognoses “assume that a ceasefire is brokered within a couple of months, followed soon after by the start of a major reconstruction effort in Ukraine,” the multilateral bank said.

Under such a scenario, Ukraine’s war-battered gross domestic product should rebound by 23 percent next year.

But the heavy and far-reaching economic sanctions imposed on Russia by Western countries would mean that it would register zero growth.

“Sanctions on Russia are expected to remain for the foreseeable future, condemning the Russian economy to stagnation in 2023, with negative spillovers for a number of neighbouring countries in eastern Europe, the Caucasus and Central Asia,” the EBRD said.

“With so much uncertainty, the bank intends to produce a further forecast in the next couple of months, taking into account further developments.”

Belarus, which also faces Western sanctions over its role in the conflict, was forecast to shrink by three percent this year and then stagnate in 2023.

Al Jazeera