Russia’s war expected to cut Ukraine’s GDP by almost half: World Bank

The World Bank said the ongoing Russian invasion of Ukraine is expected to cut the former Soviet state’s gross domestic product (GDP) by 45.1 percent this year. 

In a report published this weekend, the World Bank said the ongoing invasion has created an “economic contraction” in Ukraine, adding that important infrastructure such as rail, bridges, ports, and roads have been destroyed due to conflict.

It said early estimates from March suggested the cost to fix damaged infrastructure will be $100 billion, about two-thirds of the country’s 2019 GDP. 

The conflict has also cut off Ukraine’s good trades, as damaged transit routes and lost access to the Black Sea made the country lose 90 percent of its crucial grain trade and half of its overall exports.

“The planting and harvest seasons have been disrupted. Electricity consumption, which is often used as a high-frequency proxy for economic activity, decreased by more than 25 percent within two weeks of the invasion,” the organization said. 

“Electricity data were suspended, and the war has continued—indicating that these figures are likely much higher now. The war is estimated to have caused half of Ukrainian businesses to shut down completely, while the other half has been forced to operate well below capacity.”

The Bank added that losses from the COVID-19 pandemic are also part of the projected economic shrinkage, along with the destruction of schools and disruption to schooling.

“With physical capital and vital assets destroyed and degraded, combined with scarring from the war and pandemic, the recovery will be more difficult without significant reconstruction efforts and capital flows,” the organization said. 

Neighboring European countries such as Romania, Croatia, and Poland are also expected to take an economic hit amid an influx of Ukrainian refugees entering their countries and higher costs due to the conflict. 

The World Bank also forecasted Russia’s economic output would fall 11.2 percent this year, due in part to steep sanctions implemented by Western powers against Moscow.