The International Monetary Fund warned on Monday that the Russian invasion could have a serious repercussions, including increasing prices and the inability to plant crops, as Ukraine's government continues to function, and the banking system is stable and debt payments are viable in the short term.
The country's output would fall by 10 per cent this year assuming a prompt resolution of the war, according to the International Monetary Fund in an analysis of the economy in the wake of the Russian invasion.
The situation will worsen if the conflict is prolonged, and the fund warned of the huge uncertainty surrounding the forecasts.
The IMF said that the annual output contraction could eventually be higher, in the range of 25 -- 35 per cent, due to wartime data for conflicts in Iraq, Lebanon, Syria and Yemen. The country's economy grew by 3.2 per cent in 2021, as a result of a record grain harvest and strong consumer spending.
In the wake of the Russian invasion on February 24, the economy in Ukraine changed dramatically, said Vladyslav Rashkovan, the alternate executive director for Ukraine on the IMF board.
As of March 6, 202 schools, 34 hospitals, more than 1,500 residential houses including multi-apartment houses, tens of kilometres of roads and countless objects of critical infrastructures in several Ukrainian cities have been destroyed by Russian troops, the official said.
Ports and airports have also been closed due to massive destruction, he said.
Last week, Oleg Ustenko, economic adviser to Ukraine's President Volodymyr Zelenskyy, estimated the damage at US $100 billion.
Despite the extensive damage, the government and the country have continued to function.
Rashkovan said that banks are open, working even during the weekends.
As of Mar 1, the country had foreign reserves of US $27.5 billion, which is enough for Ukraine to meet its commitments, he said.
The IMF approved a US $1.4 billion emergency aid program for the country last week, but it didn't appear to be at risk in the short term, although there are very large uncertainties, according to the statement given by large reserves and significant financial support for debt sustainability.
The IMF cautions against the effects of the war on the global economy, beyond the human and economic losses in Ukraine.
Since the conflict began, the prices of energy and agriculture have gone up and the fund warned they could worsen, fuelling rising inflation.
The report said that disruptions to the spring agriculture season could also affect exports and growth and imperil food security.
Ukraine and Russia, considered the breadbasket of Europe, are among the largest wheat exporters in the world. Most Ukrainian wheat is exported in the summer and autumn.
The IMF says that the initial impact will be on prices, which would also push prices of other food like corn higher.
If farmers are not able to plant, supplies could be hit if they are unable to plant.
IMF Managing Director Kristalina Georgieva said on Sunday that war in Ukraine means hunger in Africa.
Export disruptions in the Black Sea have immediate consequences for countries such as Egypt, which rely heavily on grain imports from Russia and Ukraine, according to the UN World Food Program in a report Friday. Countries that rely heavily on imported grain will also feel the pain, including Afghanistan, Ethiopia, Syria and Yemen.