The war in Ukraine will have a severe effect on economies far beyond the immediate area of the conflict, according to new research from the European Bank for Reconstruction and Development (EBRD).

In its first economic forecast since the war began, the EBRD has cut its growth forecast for 2022 for the regions where it operates by more than half - to 1.7 per cent, down by 2.5 per cent on its previous forecast. It forecasts sturdier growth across its regions of 5 per cent in 2023.

Describing the effects of the war as “the greatest supply shock since at least the early 1970s”, the Bank predicts that the increased cost for commodities such as food, oil, gas and metals will have a profound impact on economies, particularly those in lower income countries. Russia and Ukraine supply a disproportionately high share of commodities, including wheat, corn, fertiliser, titanium and nickel.

The new forecasts are based on a series of assumptions about events in the coming months, and therefore have a high degree of uncertainty. Nevertheless, it is clear that many economies will be severely hit and that some will suffer more than others.

For example, the EBRD expects Ukraine’s GDP to fall by 20 per cent this year and Russia’s by 10 per cent. Ukraine’s GDP had been forecast to grow by 3.5 per cent this year, and Russia’s by 3 per cent.

In Armenia, the bank forecasts GDP growth by 1.5% in 2022, and by 4% in 2023.

According to the report, Armenia and Georgia have high export shares to Russia (25-30 per cent), which would likely be affected by the expected downturn of the sanctioned Russian economy. Armenia might also be hurt by a fall in remittances from Russia. Increasing arrivals of Russians who seek refuge in Armenia and Georgia might compensate this to some extent. And tourism is expected to take a hit in many countries including Armenia, Estonia, Georgia and Montenegro.



The EBRD has not been doing new business in Russia since 2014, and announced that it had closed its offices in Moscow as well as in Minsk. The bank has announced an initial €2 billion resilience package to support its economy and its affected neighbors.

Beata Javorcik, Chief Economist of the EBRD, stated that “the war on Ukraine has been having a profound impact on the economies in the EBRD regions as well as globally. Inflationary pressures were already exceptionally high and it seems certain they will now be worse, which will have a disproportionate affect on many of the lower income countries where we work.”

Europe has also seen the greatest force displacement of people since the Second World War, and the report examines the potential consequences of this migration.

A number of countries have also announced higher targets for military spending since Russia’s invasion of Ukraine.

The EBRD forecasts assume that a ceasefire is brokered within a couple of months, followed soon after by the start of a major reconstruction effort in Ukraine which will bring GDP by end-2023 back close to, but still below, pre-war levels.

With so much uncertainty, the Bank intends to produce a further forecast in the next couple of months.