Ukraine destroyed biz con – supply chains, trade

The ongoing war in Ukraine has dimmed prospects of a post-pandemic economic recovery for emerging and developing economies in the  region, says the World Bank’s  for the region, released today.

Economic activity will remain deeply depressed through next year, with minimal growth of 0.3% expected in 2023, as energy price shocks continue to impact the region. So far, however, the region has weathered the storm of Russia’s invasion of Ukraine better than previously forecast. Regional output is now expected to contract by 0.2% this year, reflecting above expectation growth in some of the region’s largest economies and the prudent extension of pandemic-era stimulus programs by some governments.

Ukraine’s economy is now projected to contract by 35% this year although economic activity is scarred by the destruction of productive capacity, damage to agricultural land, and reduced labor supply as more than 14 million people are estimated to have been displaced. According to recent World Bank estimates, recovery and reconstruction needs across social, productive, and infrastructure sectors total at least $349 billion, which is more than 1.5 times the size of Ukraine’s pre-war economy in 2021.

"Russia’s invasion of Ukraine has triggered one of the biggest human displacement crises and exacted a heavy toll on human and economic life,” said  region. “Ukraine continues to need enormous financial support as the war needlessly rages on as well as for recovery and reconstruction projects that could be quickly initiated."

The global economy continues to be weakened by the war through significant disruptions in trade and food and fuel price shocks, all of which are contributing to high inflation and subsequent tightening in global financing conditions. Activity in the euro area, the largest economic partner for emerging and developing economies (EMDEs) of Europe and Central Asia, has deteriorated markedly in the second half of 2022, due to distressed supply chains, increased financial strains and declines in consumer and business confidence. The most damaging effects of the invasion, however, are surging energy prices amid large reductions in Russian energy supply. Downgrades to growth forecasts for 2023 are broad-based across EMDEs in Europe and Central Asia as the regional outlook is subject to considerable uncertainty. Prolonged or intensified war could cause significantly larger economic and environmental damage and greater potential for fragmentation of international trade and investment. The risk of financial stress also remains elevated, given high debt levels and inflation.