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Ukraine’s finance minister says the country’s economy could shrink by half this year due to the war, a report says

Ukraine’s finance minister says the country’s economy could shrink by half this year due to the war, a report says

Irina Zubchenko walks with her dog Max amid the destruction caused after shelling of a shopping center, in Kyiv

The World Bank recently said population displacement, damage to infrastructure, and disruption to trade would shrink economy by 45%.AP

  • Finance minister Serhiy Marchenko said Ukraine’s GDP would shrink by 30-50% this year, per Reuters.

  • Ukraine’s economy has been hit by production slowdowns and a massive humanitarian crisis.

  • Marchenko is reportedly due to meet with G7 members next week to discuss the country’s finances.

Ukraine’s finance minister has said the country’s economy could be half the size it was before Vladimir Putin’s forces invaded, amid a mass exodus of citizens and industry shutdowns.

Reuters reported the news, citing an unspecified televised interview on Saturday.

The finance minister Serhiy Marchenko said Ukraine’s GDP could fall by between 30% and 50% this year, according to the interview reported by Reuters. The comments came as the country seeks financial aid to combat falling tax revenues while trying to hold off Russia’s offensive.

On Saturday, Reuters reported that Marchenko was planning to visit Washington next week along with Prime Minister Denys Shmyhal and central bank governor Kyrylo Shevchenko to meet with finance officials from G7 countries in a meeting chaired by the World Bank, citing sources.

In March, Reuters reported a televised interview from an unspecified source in which Marchenko said the war had shut down 30% of Ukraine’s economy.

“Our tax revenues do not allow us to cover our needs, the main revenue stream is borrowing,” Marchenko is reported to have said at the time.

His latest assessment is broadly in line with the World Bank’s forecast delivered on April 10, which projected a 45% contraction to Ukraine’s GDP this year, citing displacement of people, damage to infrastructure, and disruption to trade.

Ukraine’s economy is known for its exporting of commodities like corn and wheat, which S&P Global estimated at 12.8% and 10.5% of the world’s exports respectively last year. Production and exporting of these and other goods have been heavily disrupted by the war.

An economic collapse has been exacerbated by a huge humanitarian crisis that has greatly reduced Ukraine’s population. According to the UNHCR, nearly 4.8 million refugees have fled the country since February 24, further reducing the country’s ability to generate economic output.

Comparatively, Russia’s economy is expected to shrink by up to 15% as a result of widespread sanctions, high inflation and boycotts by Western companies. But Putin will likely be spared a crippling recession by rising oil prices as Western countries continue to import Russian energy.

Read the original article on Business Insider