The expected downturn is deeper than the 20 per cent contraction the EBRD estimated in March because of a “larger-than-previously-expected contraction in Ukraine as the war drags on,” it said in its report.
Ukraine’s economy will plunge by close to a third in 2022, more than previously expected, in a scenario in which the conflict ends this year, the European Bank for Reconstruction and Development said. Russia’s invasion has upended exchange energy, agricultural products and fertilisers and disturbed supply chains, bringing about more slow development across eastern Europe. The estimates expect that a cease-fire will be negotiated this year and reconstruction of the country can begin in 2023, with the economy projected to grow 25 per cent.
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Gas prices in Europe have risen to historic highs, furling inflation across the region and putting manufacturers at a disadvantage compared with US-based companies where gas is as much as four times cheaper, the EBRD said.
“Aside from direct war damage, agricultural production is hampered by lack of fuel, access to seeds, fertiliser and equipment,” the bank said in its report. Ukraine, which accounts for almost 10 per cent of global wheat exports, 14 per cent for corn and 37 per cent of sunflower oil, is not expected to be able to plant or harvest up to 20-30 per cent of its agricultural land.
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