Biggest reconstruction effort since Marshall Plan needed for Ukraine, IMF warns Business

Ukraine is set to need the biggest rebuilding drive since the Marshall Plan rebuilt post-war Europe as the IMF warned its economy could face a 35% drop in output.

Kristalina Georgieva, the head of the IMF, has said Ukraine will need huge international support to bolster its reconstruction efforts once the war is over after making dire predictions about the economic carnage caused by the Russian invasion.

The IMF predicted that Ukraine’s economy would shrink by at least 10% this year even if there was a quick resolution to the conflict and it received huge foreign support.

However, he warned that output in 2022 could fall by more than a third as mass migration and war damage lead to “a markedly more pronounced contraction in output” and a collapse in trade.

Economists have said Ukraine’s reconstruction efforts will be the largest in Europe since World War II following the damage caused by Russian missile attacks on its cities.

Liam Peach of Capital Economics said: “I don’t think we’ve seen such disruption in Europe for many decades. It seems that a lot of bombings and military operations took place in urban areas in Ukraine.

The country will need significant funding from “international partners to begin rebuilding this infrastructure” in what will be the largest reconstruction effort since World War II and the US-funded Marshall Plan.

Following the decimation of Europe in World War II, the region was rebuilt with billions of dollars in US aid under the Marshall Plan.

“There has probably been a permanent blow that will weigh on Ukraine’s growth prospects,” Peach said.

The IMF has calculated that the Ukrainian government will have a funding black hole of $7.4 billion this year, as it warned that “downside risks are extremely high”.

“The intensity of the ongoing conflict is causing widespread destruction of Ukraine’s productive capacity and rapidly worsening the outlook,” the IMF said.

“The economy is expected to experience a deep recession this year. Domestic demand is expected to contract sharply as the war persists, with consumption limited to basic needs with the displaced population, supply disruptions, destruction of infrastructure and exceptional uncertainty.