Russia's Gross Domestic Product (GDP), under massive sanctions since the beginning of the invasion in late February, will contract by 8.5% this year, and Ukraine's by 35%, according to the latest IMF economic forecasts released on Tuesday.
These figures represent respectively 11.3 and 38.5 percentage points less than in January's forecasts that gave Russia a growth of 2.8% and Ukraine 3.5% in 2022.
The IMF emphasizes uncertainty about the projections for Ukraine because “it is impossible to obtain accurate data on the damage caused to the economy”. But in the face of massive infrastructure damage and millions of displaced people, the organization warns that the contraction will be “very strong”.
“Even if the war ended soon, the loss of life, the destruction of physical capital and the flight of citizens would greatly hamper economic activity for many years,” the authors of the report warned.
As for Russia, “trade and financial sanctions, including the exclusion of some Russian banks from the Swift international payment system and the prohibition of access to central bank assets, will have a major impact on the Russian economy,” they say.
After falling by 60%, the ruble has returned to levels close to those before the invasion.
But the departure of foreign companies from Russia affects many industries, such as aeronautics and air transport, finance, the IT sector and agriculture.
“Therefore, the outlook remains bleak,” the IMF estimates.
In addition, a loss of investor confidence will lead to a significant drop in private investment and consumption, which can only be “partially offset by budgetary expenditures”.
As a result, the Fund forecasts a sharp contraction of the Russian economy in 2022 and a further decline in GDP of around 2.3% in 2023.
The IMF warns that the impact could be greater if some economies, such as Germany's, were to “disconnect” from Russian energy. Germany imports a large amount of Russian gas, coal and oil.
The institution does not make forecasts for 2023 for Ukraine given the degree of uncertainty.
(With information from AFP)
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