Ukraine’s ports have already suffered a fall in traffic of more than 75%, while the war has also shut half of the country’s businesses. Photo: Alexander Ermochenko/Reuters
The World Bank has forecast that both the Russian and Ukrainian economies will sharply shrink this year as a result of the current geopolitical conflict.
Ukraine’s economy is expected to collapse by as much as 45.1% in 2022, worse than the 10% to 35% prediction last month, while Russia’s GDP will decline 11.2%, the bank said.
Ukraine’s economy depends heavily on agriculture, which could be hit further if access to the Black Sea is totally cut off by Moscow.
Ukraine’s ports have already suffered a fall in traffic of more than 75%, while the war has also shut half of the country’s businesses.
The Bank added that many surrounding countries will also suffer a larger negative impact as a result of the conflict, with increased western sanctions and a financial shock due to eroding confidence.
The Eastern Europe region, comprising Ukraine, Belarus and Moldova, is forecast to show a GDP contraction of 30.7% in 2022, due to disruption of trade after two years of the COVID pandemic.
In addition, the Kyrgyz Republic, Moldova and Tajikistan are also projected to fall into recession this year.
“The war is having a devastating impact on human life and causing economic destruction in both countries, and will lead to significant economic losses in the Europe and central Asia region and the rest of the world,” the Washington-based lender said in its forecast.
Both the World Bank and the International Monetary Fund (IMF) will host finance ministers and central bank bosses at their annual spring meetings later this week. They are expected to announce further offers of financial support to countries affected by the invasion.
The bank has sent almost $1bn (£767m) of assistance to Ukraine so far and has promised a further $2bn in the coming months.
“The magnitude of the humanitarian crisis unleashed by the war is staggering. The Russian invasion is delivering a massive blow to Ukraine’s economy and it has inflicted enormous damage to infrastructure,” Anna Bjerde, World Bank vice president for Europe and Central Asia, said.
“The results of our analysis are very sobering. Our forecasts show that the Russian invasion in Ukraine has reversed the region’s recovery from the pandemic.
“This is the second major shock to hit the regional economy in two years and comes at a very precarious time for the region, as many economies were still struggling to recover from the pandemic.”
Watch:President Biden focuses on Ukraine, economy in State of Union and says we will ‘be okay’
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
