In Ukraine, they calculated: fighting is taking place in areas generating 20% of the country’s GDP
Ukraine's economy this year could shrink by more than a third amid active hostilities in regions that generated about 20% of GDP.
This is stated in the new NBU report on financial stability.
“During February-March, fighting continued in the regions that formed about half of Ukraine’s GDP. As of mid-June, territories of regions that last year generated about 20% of GDP remain under the influence of active hostilities or under occupation, the National Bank reported.
According to NBU surveys, the share of enterprises that reduced production capacity utilization by more than a third or did not work at all decreased from 61% in the first ten days of March to 54% at the end of May.
“However, key problems remain: seaports are blocked, with the exception of the Danube, logistics are disrupted, fuel shortages persist, and domestic demand is suppressed. The decline in GDP by the end of 2022 will exceed a third,” the NBU notes.
In addition to reducing current production, war significantly reduces the potential of the economy. According to NBU estimates, losses of physical capital from the destruction of enterprises, housing and infrastructure reached $100 billion by the beginning of May - this is the equivalent of 50% of GDP in 2021. The loss of human capital due to migration and death of citizens is also very significant.
“Given the high uncertainty, investment activity has actually been suspended. To recover from the consequences of the war, the economy may need a very long period and assistance from international partners,” the National Bank noted.
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