Ukraine's economy shrank 16 per cent year-on-year in the first quarter of this year and could contract 40 per cent in 2022 as a result of Russia's invasion, the economy ministry said in a statement on Saturday, citing preliminary estimates.
"Areas in which remote work is impossible have suffered the most," it said.
Last month, the International Monetary Fund said Ukraine's economy could contract sharply in 2022 due to the war.
Ukraine's economy is expected to contract by 10 per cent in 2022 as a result of Russia's invasion, but the outlook could worsen sharply if the conflict lasts longer, IMF said in a staff report released on March 14.
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 per cent to 35 per cent, based on real wartime gross domestic product data from Iraq, Lebanon and other countries at war.
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 as a result of the war.
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 per cent in 2022, assuming a prompt resolution of the war, and substantial donor support.
That compares to a 6.6 per cent drop in output in 2014, the year that Russia annexed the Crimea region of Ukraine, and just under 10 per cent in 2015.
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.
Rising debt
The war - the biggest in Europe since World War Two - has sparked a massive humanitarian and economic shock, the IMF report said, citing rapidly increasing loss of life and significant infrastructure damage across the country. Russia describes its invasion as a "special military operation."
It said Ukrainian authorities had continued to service their external debt obligations and the country's payment system remained operational, with banks open and mostly liquid.
It also said authorities had implemented appropriate emergency measures to stabilize markets and the economy, but the downside risks were "exceedingly high" and the country faced large fiscal and external financing gaps.
The country's public debt was expected to spike to 60 per cent of GDP in 2022 from around 50 per cent in 2021, the report said.
Vladyslav Rashkovan, alternate executive director for Ukraine at the IMF, told the IMF's board that Ukrainian authorities were in broad agreement with the IMF staff's assessment of the economic situation, and underscored the need for more financial support.
He said liquidity buffers adopted after the Russian invasion were sufficient for financing expenditures and repaying liabilities, with most Ukrainian companies still paying taxes and some even paying in advance to support the budget.
In his statement, Rashkovan said Ukraine had spent the equivalent of $1.4 billion on servicing and repayment of its foreign exchange public debt since the start of the war.
