Russia’s economy is set to shrink by 10% this year and Ukraine’s gross domestic product (GDP) by as much as 20% as the conflict results in “the greatest supply shock” for 50 years, according to a forecast by the European Bank for Reconstruction and Development (EBRD) on Thursday.
Prior to Russia’s invasion of Ukraine on 24 February, the London-based bank had forecast Ukraine’s GDP would expand by 3.5% this year and the Russian economy would grow by 3%.
The bank says its latest forecasts “assume that a ceasefire is brokered within a couple of months, followed soon after by the start of a major reconstruction effort in Ukraine.”
Were this to play out, Ukraine’s GDP should rebound by 23% next year, while sanctions-hit Russia would be set for zero growth.
Meanwhile, the lender says the global economy faces “the greatest supply shock since at least the early 1970s”.
“Russia and Ukraine supply a disproportionately high share of commodities, including wheat, corn, fertilizer, titanium, and nickel.”
The bank predicts higher prices for such commodities will have a “profound impact” on global economies, hitting lower-income nations particularly hard.