The Ukrainian economy could shrink by more than a third this year if the war with Russia continues, the International Monetary Fund said.
The global lending body said the country is already facing a downturn of 10% due to the invasion, which has hit major cities, destroyed airports and precipitated a refugee crisis.
The IMF recently sent $1.4bn in emergency funds to Ukraine – the maximum allowed under its rules.
Billions more will be needed, it said.
The dire economic outlook for Ukraine was included in a report prepared before the emergency loan was approved last week. The estimates were calculated by looking at wartime economies in countries such as Lebanon, Iraq and Syria.
“With the war ongoing, the situation remains extremely fluid, and any forecast is at this stage subject to massive uncertainty,” the report said, predicting the economy could contract by between 25% to 35%.
It said the estimates in the report should be “seen as a bare minimum”.
In 2014 and 2015, Ukraine also suffered economic shock, with output falling 6.6% and 10% respectively, following Russia’s annexation of Crimea.
But Ukraine’s economy, which is heavily dependent on exports, expanded 3% last year, lifted by a record grain harvest. Output had been expected to grow another 3.6% in 2022.
Now, the IMF said: “A deep recession and large reconstruction costs are to be expected, on the backdrop of a humanitarian crisis.”
For now, the government has prioritised defence and social spending and remained current on its foreign debt obligations, according to the 7 March report. Companies are still paying taxes and money is still flowing through its financial system, though many bank branches have shut and authorities have had to take emergency measures.
The country is likely to struggle even more, the report warned.
The IMF plans to set up tools to help its members send money to help Ukraine, which has already spent the equivalent of $1.4bn to service and repay the government’s foreign debt since the start of the war, IMF officials said.
In an interview with the BBC, the head of Ukraine’s central bank Kyrylo Shevchenko said Russian assets frozen in foreign countries, as a result of sanctions, should be used to help rebuild the country.
“The need for money will be huge,” he told the BBC. “It could be fulfilled through loans and grants from multinational organisations and direct help from other countries. However, a large share of financing is needed to be obtained as a reparation from the aggressor, including funds that are currently frozen in our allied countries.”(BBC)