The region’s economy is expected to shrink 4.1% this year compared to the prewar 3% growth forecast, as the economic shock of the war increases the impact of the Covid pandemic. -19. According to the World Bank, this is the second contraction in a few years, twice as large as the 2020 pandemic contraction.
Ukraine’s economy is expected to shrink by about 45.1% this year, but the extent of its decline depends on the duration and intensity of the war. Russia’s economy, which has been hit by unprecedented sanctions, is already in a serious recession, with production expected to decline by 11.2% in 2022.
The scale of the humanitarian crisis caused by the war is staggering
“The magnitude of the humanitarian crisis caused by the war is staggering. Russia’s invasion has devastated the Ukrainian economy and caused tremendous damage to infrastructure,” said the World Bank’s Deputy Governor for Europe and Central Asia. Anna Bjerde says.
“Ukraine is struggling to keep its economy running, and the government is striving to help Ukrainian citizens who are suffering and facing dire situations, so they need immediate financial support. “She added.
The war broke out in addition to a sharp slowdown in the global economy, rising inflation and debt, and growing concerns about rising poverty levels. Economic impacts are spilling over through multiple channels, including commodity and financial markets, trade and immigration connections, and negative impacts on self-confidence.
© UNICEF / Alexei Philippov
Impact on emerging and developing countries
According to the World Bank, the war has also hit emerging and developing countries in Europe and Central Asia. The region is already heading for a slowdown this year due to the prolonged effects of the pandemic.
With the exception of Russia and Ukraine, Belarus, Kyrgyzstan, Moldova and Tajikistan are likely to fall into recession this year, but growth forecasts are down in all economies due to the effects of the war, weaker growth than eurozone expectations, and commodities. .. , Trade and funding shocks.
Russia and Ukraine account for about 40% of wheat imports in the region, and Central Asia and the South Caucasus account for more than 75%. Russia is also a major export destination for many countries, but in some Central Asian economies, including Kyrgyzstan and Tajikistan, remittances from Russia account for about 30% of GDP.
“The war and pandemic in Ukraine have reiterated that the crisis can cause widespread economic damage and reduce per capita income and development profits over the years,” Europe said. And Asli Demirgüç-Kunt, Chief Economist of the World Bank of Central Asia. “Governments in the region called for strengthening macroeconomic buffers, containing risks, and strengthening policy credibility to address potential fragmentation of trade and investment channels.
According to her, they also keep an eye on strengthening social safety nets to protect the most vulnerable people, including refugees, and ultimately improving energy efficiency to ensure a sustainable future. Must be.
Moreover, the aggression has already caused Europe’s largest refugee crisis since World War II and will probably be one of the most permanent legacy of the conflict. As a result, support for host countries and refugee communities is critical, and the World Bank is preparing operational support programs for neighboring countries to meet the growing funding needs associated with refugee flows.
$ 925 Million Emergency Fund
The World Bank Group is taking swift action to help the Ukrainian people. Thus, since the start of Russia’s invasion of Ukraine on February 24, the Group has mobilized $ 925 million in emergency loans. This prompt payment support is used to pay for hospital workers’ salaries, senior citizens’ pensions, and social programs for vulnerable people.
This rapid financing is part of the $ 3 billion bailout package that the World Bank Group is preparing for Ukraine over the next few months.