IMF: Due to the intensification of the war, the shock to Ukraine’s economy will begin in the second quarter.

According to the IMF, in a negative scenario, the war will end by the end of 2025 and not at the end of 2024 as in the base scenario. At the same time, “the shock will begin in the second quarter of 2024” due to the intensification of the war.

“This would lead to a sharp decline in real GDP of 4% in 2024 (compared to 3-4% growth in the baseline scenario) and zero growth in 2025,” the document says.

In the pessimistic scenario, an escalation of the war would affect household sentiment and the pace of migrant returns and result in further damage to infrastructure from Russian strikes.

The updated aggregate financing deficit in the pessimistic scenario is estimated at $140.6B, about $19B more than the baseline projection for 2023-2027 ($121.8B), requiring additional steps to ensure debt sustainability.

The IMF’s basic scenario has not changed significantly and predicts lower inflation.