Ukraine’s economy could collapse if war drags on: IMF
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Washington (AFP) – Ukraine’s government continues to function, the banking system is stable and debt payments are sustainable in the near term, but the Russian invasion could plunge Ukraine into a devastating recession, the International Monetary Fund said on Monday.
And he warned that the war could have wider repercussions, including threatening global food security due to rising prices and the inability to plant crops, especially wheat.
At a minimum, the country would see “output fall by 10% this year assuming a quick resolution to the war,” the IMF said in an analysis of the economy in the wake of the Russian invasion.
But the fund warned of “massive uncertainty” around the forecast, and if the conflict continues, the situation will worsen.
Citing wartime data on the conflicts in Iraq, Lebanon, Syria and Yemen, the IMF said that “the annual contraction in output could possibly be much higher, in the order of 25-35%.”
The country’s economy grew by 3.2% in 2021 amid a record grain harvest and strong consumer spending.
But following the February 24 Russian invasion, “the Ukrainian economy has changed dramatically,” said Vladyslav Rashkovan, deputy executive director for Ukraine on the IMF board.
“As of March 6, 202 schools, 34 hospitals, more than 1,500 residential houses, including multi-apartment buildings, tens of kilometers of roads and countless objects of critical infrastructure in several Ukrainian cities have been completely or partially destroyed by Russian troops,” he added. the official said in a statement.
Ports and airports were also closed due to “massive destruction”, he said.
Oleg Ustenko, economic adviser to Ukrainian President Volodymyr Zelensky, last week estimated the damage at $100 billion so far.
“Hunger in Africa”
Despite the extensive damage, the government and the country continued to function.
“Banks are open and working even on weekends,” Rashkovan said in a statement dated March 9.
As of March 1, the country held foreign exchange reserves of $27.5 billion, “which is enough for Ukraine to meet its commitments”, he said.
The IMF, which last week approved a $1.4 billion emergency assistance package for the country, said that given the large reserves and strong financial support, “the sustainability of the debt does not seem threatened” in the short term, although there are “very large” uncertainties.
Beyond the human and economic losses in Ukraine, the IMF warns of the repercussions of the war on the world economy.
Since the start of the conflict, energy and agriculture prices have soared and the fund has warned they could get worse, fueling rising inflation.
“Disruptions to the spring agricultural season could also reduce exports and growth and jeopardize food security,” the report said.
Ukraine and Russia, considered the “breadbasket of Europe”, are among the largest wheat exporters in the world. Most Ukrainian wheat is exported in summer and autumn.
The initial impact will be felt in prices, which will also push up the prices of other foods like corn, according to the IMF.
But a prolonged conflict could affect supplies if farmers are unable to plant.
“War in Ukraine means hunger in Africa,” IMF Managing Director Kristalina Georgieva told CBS on Sunday.
The United Nations World Food Program warned in a report on Friday that “disruptions to exports in the Black Sea have immediate implications for countries like Egypt, which are heavily dependent on grain imports from Russia and Ukraine. “.
And countries that rely heavily on imported grain will also feel the pain, including “hunger hotspots like Afghanistan, Ethiopia, Syria and Yemen”.
© 2022 AFP