Ukrainians walk next to destroyed buildings in Borodianka, located northwest of Kyiv, on Tuesday. On Sunday, the World Bank said the Eastern European nation's economy is on track to shrink by half this year. Photo by Vladyslav Musienko/UPI | License Photo
April 10 (UPI) -- Ukraine's economy is on track to shrink by nearly half this year, according to forecasts by the World Bank, as Russia's invasion of the Eastern European nation raises fears of a sharp global slowdown while countries still combat the economic fallout of the COVID-19 pandemic.
In a report published Sunday, the world lender to low- and middle-income economies said it expects Ukraine's output to shrink 45.1% this year, though the "magnitude of the contraction will depend on the duration and intensity of the war."
If the war ceases soon, economic recovery can be spearheaded and losses contained, it said, adding that a protracted war, however, "could increase human and economic costs, heighten policy uncertainty, fragment regional integration and disrupt critical trade and investment links."
Russia invaded Ukraine on Feb. 24, resulting in vast destruction to infrastructure and the deaths of more than 1,760 civilians with 4.5 million forced to flee their country and another 7.1 million internally displaced, according to United Nations data.
The war attracted the swift condemnation of democratic nations and their stiff punitive sanctions, which have already taken a bite out of Moscow's economy.
According to the report, Russia's economy has slipped into "a deep recession" with output forecast to reduce by 11.2% this year.
A downside scenario in report, though, projects Russia's gross domestic product to contract 20% this year and Ukraine's to shrink by 75%.
For Europe and Central Asia as a region, the war has erased a 3% growth projection, with the regional economy now on target to reduce by 4.1% percent, the report said, as the war exacerbates the economic effects of the COVID-19 pandemic.
"Neighboring ECA countries are likely to suffer considerable economic damage because of their strong trade, financial and migration links with Russia and Ukraine," the report said.
Particular concern is on energy and wheat, with Russia a major energy exporter, especially for Europe, and the waring nations are together considered the world's breadbasket as they produce between 25% and 30% of global exports of the grain.
Late last month, the U.N.'s World Food Program warned the conflict could create a global food insecurity crisis, with the two countries also producing 20% of the world's maze and 80% of its sunflower oil while the WFP buys 50% of its grain from Ukraine with several countries dependent on it for its supply of wheat.
The cost for the grain has already climbed and could climb higher, as well as for other crops, as Ukrainian farmers trade in their hoes for weapons and shelling destroys fields and shipping lanes close, such as that through the Black Sea, which carries 90% of Ukraine's grain exports.
The report said that despite the two nations only accounting for less than 3% of global exports, the war and subsequent sanctions have weakened supply chain routes while increasing shipping and insurance costs.
Supply shortages and higher prices for energy and food will fuel inflation, it said, affecting not only neighboring countries, but the rest of the world.
"The Ukraine war and the pandemic have once again shown that crises can cause widespread economic damage and set back years of per capita income and development gains," Asli Demirguc-Kunt, World Bank chief economist for European and Central Asia, said in a statement.
Priest Andrii Gavalin presides over the funeral of Eugene Bogdanov, 35, in Bucha, Ukraine, on May 10. Bogdanov went missing two months ago. His wife, Natalia Bogdanova, was searching for him throughout the Kyiv and Bucha regions when his body was found at a morgue in Belaya Tserkov on May 9. Photo by Ken Cedeno/UPI | License Photo