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The Ukrainian economy will suffer a sharp contraction in 2022 due to the Russian invasion: IMF

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By Andrea Shalal, Natalia Zinets and David Lawder

WASHINGTON, March 14 (Reuters) – The Ukrainian economy is expected to contract 10% in 2022 as a result of the Russian invasion, but the outlook could worsen or increase if the conflict drags on, according to an International Monetary Fund staff report published on Monday.

The report, prepared before the IMF approves an emergency financing of 1.4 billion dollars, confirmed that Ukraine’s economic output could be reduced by 25% to 35%, changed in the wartime gross domestic product data from Iraq, Lebanon and other countries at war.

The report, dated March 7, said Ukraine has a foreign financing gap of $4.8 billion, but its needs for increased resources were expected to increase and it would need more on concessional terms.

According to the report, the country’s public debt is expected to rise to 60% of GDP in 2022, up from 50% in 2021.

“Staff expect growth prospects to deteriorate by at least 13.5 percentage points relative to the pre-war baseline, with output falling 10% this year, assuming an early resolution of the war.” and substantive support from donors,” it said.

It compares with the 6.6% drop in production in 2014, and then Russia annexes the Ukrainian region of Crimea, and the total is 10% in 2015.

IMF staff said there was enormous uncertainty about the outlook, given the intensity of the conflict, noting that the growing loss of physical capital stocks and huge refugee flows could lead to a “significantly steeper output contraction”. “, a collapse of trade flows and lower tax revenues.

The war – Europe’s biggest since World War II – has caused a huge humanitarian and economic shock, according to the IMF report, citing rapidly rising loss of life and extensive damage to infrastructure across the country.

The report notes that the Ukrainian authorities have continued to service their foreign debt and that the country’s payment system continues to function.

(Reporting by Andrea Shalal and David Lawder in Washington and Natalia Zinets in Lviv; Editing in Spanish by Javier López de Lérida)

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