(Bloomberg) -- Ukraine's economy will shrink by a fifth this year before bouncing back in 2023, according to the European Bank for Reconstruction and Development, under a scenario where a cease-fire is brokered in a couple of months.
The forecast is subject to major downside risks “should hostilities escalate or should exports of gas or other commodities from Russia become restricted,” the EBRD said in its biannual Regional Economic Update published on Thursday.
Russia's invasion of Ukraine has created the greatest supply shock since at least the early 1970s, the EBRD said, snarling supply chains, upending the energy trade and threatening food exports due to both countries' key agricultural sectors.
“Currently, the war is happening on territories that produce 60% of Ukrainian GDP,” the EBRD said in the report. About 30% of businesses have stopped production, and electricity consumption is estimated at 60% of pre-war levels, it added.
The forecasts assume that a cease-fire will be negotiated within a couple of months, and reconstruction of the country can begin in 2023, the economy will grow 23% next year, it said.
Russia's economy is forecast to shrink by 10% this year and stagnate in 2023, according to the EBRD. Russia's recession could be deeper if Europe joins a ban on its oil imports or severely reduces the use of Russian natural gas.
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