IMF’s director released its new World Economic Outlook for Russia’s war in Ukraine

The IMF presented its 2018 World Economic Outlook (WEO) this week, which takes into account the effects of Russia’s war in Ukraine, large-scale sanctions, and a significant humanitarian catastrophe. It is predicted that the war will stymie global recovery, delaying economy and raising prices even more. International spillovers and the humanitarian crisis are projected to have a considerable impact on Europe.

So, what issues will the global economy face in the coming months and years? What factors could have a significant impact on the Ukrainian economy during the conflict? Who can Ukraine rely on for assistance if peace has been achieved? In an exclusive conversation with Ukrinform, IMF European Department Director Alfred Kammer addressed these problems.

UKRAINIAN AUTHORITIES SHOULD BE GIVEN CREDIT

Let’s take a look at Ukraine’s economic prospects. The Ukrainian government predicted a 16 percent drop in GDP in the first quarter and a 40 percent drop by the end of the year in early April. What is the IMF’s assessment of Ukraine’s condition, and what major factors could have a substantial impact on the country’s prospects?

– To begin, I’d want to emphasize that the Ukrainian authorities deserve a lot of credit for their quick response when the battle broke out.

The war has resulted in a tragic loss of life, damage of physical capital and essential infrastructure, huge outbound migration (4 million people, or nearly 10% of the population), and internal displacement (6.5 million people). All of this is wreaking havoc on the country’s productive ability, particularly in the crucial agriculture sector (which is responsible for 12 percent of GDP and half of the export revenues).

Consumption will almost certainly fall sharply, as will investment. Given the extreme uncertainty around the length and geographic scope of the ongoing battle, I wouldn’t place too much stock in precise numbers at this point, but for the time being, we’re estimating a 35 percent yearly output decrease, which is broadly in line with the estimate you cite.

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