Russia’s war to deal 10 per cent hit to Ukraine economy, warns IMF

The Ukrainian economy is set to contract sharply this year as Russia’s invasion hobbles domestic consumption, reveals fresh forecasts by the world’s economic watchdog.

Output in Ukraine will shrink around 10 per cent this year, according to the International Monetary Fund (IMF).

The hit to the country’s economy could eventually rise to some 35 per cent if Moscow’s assault on Ukraine intensifies and lasts over the long term.

Functioning of normal economic activity in Ukraine has been hit by the Kremlin’s decision to send troops into Kyiv and has forced large swathes of the population to flee the country.

Ukrainians who have stayed have had their lives completely upended by the war.

“Domestic demand is expected to contract sharply as the war persists,” the IMF said, adding consumption will be “limited to basic needs with the population displaced”. 

“Supply disruptions, the destruction of infrastructure, and exceptional uncertainty” will all weigh on output, the organisation added.

As a result, the country’s economy has been dragged into turmoil.

“This major shock happens against a background of already-high inflation (10 per cent year on year in January) and high gas import prices, the spread of the Omicron variant, and the loss of financial market access,” the IMF added.

Russia’s barbaric shelling of Ukrainian cities has reduced integral infrastructure such as bridges and roads to rubble, which will reduce the country’s capacity to produce goods and services.

“Mass migration would result in a significantly more pronounced output contraction, a collapse in trade flows, further diminished tax collection capacity, and a greater deterioration in the fiscal and external positions,” the IMF said.