The Russia’s GDPunder the weight of mass sanctions following its invasion of Ukraine in late February, is expected to shrink 8.5% this year and Ukrainian GDP 35%according to the spring forecast published today by the International Monetary Fund.
They are respectively 11.3 and 38.5 percentage points lower than the previous ones January forecasts.
The IMF underlines the uncertainty forecasts for Ukraine, because “it is impossible to provide accurate data on the damage to the economy.” However, given the massive infrastructure damage and the millions of displaced people, the institution predicts that the contraction of GDP will be “very serious”.
“Even if the war ended soon,” human losses, the destruction of physical capital and the flight of civilians would severely hamper economic activity for many years to come, the report warns.
As for Russia, “trade and economic sanctions, including the exclusion of some Russian banks from the international banking system Swift payments and the ban on access to central bank assets will have serious impact on the Russian economy“, they estimate.
After 60% collapsed, the ruble returned to near pre-invasion levels.
But the departure of foreign companies from Russia affects many industries, including aeronautics and aviation, the financial sector, the IT sector and agriculture.
“Consequently, the outlook remains bleak,” the IMF said.
In addition, a loss of investor confidence will lead to a significant drop in private investment and consumption, which will be “offset only in part by budgetary expenditure”.
The key forecast is therefore a strong recession in 2022 and a new fall in GDP of around 2.3% in 2023.
The IMF predicts that the impact could be more significant if some economies, such as Germany, are weaned from Russian energy.
The Fund does not make forecasts for 2023 for Ukraine due to the high degree of uncertainty.
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