THE economy of war-torn Ukraine is expected to shrink 35% this year, the World Bank said yesterday, with Russia’s invasion of the country displacing millions.

Following Moscow’s invasion, Ukraine’s economy has been “scarred by the destruction of productive capacity, damage to agricultural land, and reduced labor supply,” the World Bank said in an economic update for Europe and Central Asia.

The global development lender estimates more than 14 million people have been displaced by the war.

Recovery and reconstruction will require at least US$349 billion (RM1.6 trillion), or more than 1.5 times the size of Ukraine’s pre-war economy, the report said.

The US Congress last week approved another US$12.3 billion in aid to help Ukraine battle the invasion as fighting raged on.

Global food and energy prices have surged amid large reductions in Russian supply, and the World Bank said the ongoing war dampens prospects of a post-pandemic recovery for emerging and developing economies in region as well.

“The overlapping crises of the war in Ukraine, the ongoing pandemic and the surge in food and fuel prices are painful reminders that governments need to be prepared to manage massive, unexpected shocks that unravel very quickly,” Anna Bjerde, the World Bank’s vice president for Europe and Central Asia, said in a statement.

The report notes that global prices for oil, gas and coal had been picking up since early last year, but they “skyrocketed” after Russia’s invasion and sent inflation “to levels not seen for decades in the region.”

That is especially painful for countries that rely on imported energy and “countries closely connected with EU energy markets,” and the bank said countries should prepare for shortages.

Regional output is expected to contract by 0.2% this year, while growth for 2023 is pegged at 0.3%, and economic activity “will remain deeply depressed through next year.” – AFP, October 5, 2022.