The European Bank for Reconstruction and Development (EBRD) on Tuesday cut its growth projection for 2022 by 0.6 percentage point, as Russia's war on Ukraine is expected to cause a greater economic slowdown and more inflationary pressure.
The EBRD expected that regions, where it operates, will grow 1.1% this year in its latest Regional Economic Prospects report, compared to 1.7% in its previous projection released in March.
The regions' gross domestic product (GDP) growth will recover to 4.7% next year, a 0.3 percentage point drop from this year.
The Ukrainian economy is estimated to contract by 30%, it said. The previous growth forecast was minus 20%.
The GDP growth in Ukraine is foreseen to bounce back to 25% next year, assuming that substantial reconstruction work has begun by then.
The pace of recovery will be determined by how long the hostilities last, the shape of any post-war settlement, the extent of reconstruction, and the number of refugees who return to home, it said.
Beata Javorcik, the chief economist of the EBRD, said: “Only last November we were predicting growth of 3.8% across our regions for this year. But at the time we described last year’s recovery and its momentum into 2022 as bittersweet, tainted by worries over high commodity prices.
“The situation now is more concerning still, with new rises in food and energy prices, driven by Russia’s war on Ukraine, further stoking inflation.
“And, as we well know, poorer households suffer even higher rates of inflation than others because food and energy account for a larger share of their domestic budgets,” she added.
