Ukraine's economy is expected to contract by 10% in 2022, but the outlook could worsen sharply if the conflict lasts longer, the International Monetary Fund said in a staff report released on Monday.
The report, prepared ahead of the IMF's approval of $1.4 billion in emergency financing, said Ukraine's economic output could shrink by 25% to 35%, based on real wartime gross domestic product data from Iraq, Lebanon and other countries.
Ukraine had an external financing gap of $4.8 billion, IMF staff said in their March 7 report, but its financing needs were expected to grow and it would require significant additional concessional financing.
The IMF is working to set up a trust fund instrument through which bilateral donors can channel resources to Ukraine, an official with the global lender said.
The $1.4 billion already approved in emergency financing is the maximum Ukraine can borrow under current IMF rules, but the loan is having a "catalytic" effect in encouraging other donors, the official said.
The report forecast a deterioration in Ukraine's growth outlook of at least 13.5 percentage points relative to a pre-war baseline, with output falling 10% in 2022, assuming a prompt resolution of the war, and substantial donor support.
That compares to a 6.6% drop in output in 2014, and just under 10% in 2015, Reuters reported.
IMF staff said there was massive uncertainty about the outlook, given the intensity of the conflict, and warned that increasing loss of physical capital stock and huge refugee flows could result in "significantly more pronounced output contraction," a collapse in trade flows and lower tax revenues.
The country's public debt was expected to spike to 60% of GDP in 2022 from around 50% in 2021, the report said.
