ECONOMIC RESEARCH

Emerging Europe: Ukraine Crisis and Its Economic Impact

March 18, 2014

The escalating standoff over Crimea has further exacerbated Ukraine’s already acute financial and economic crisis, and sharply increased downside risks across Emerging Europe. A major adjustment supported by large-scale official financing is needed to avert a collapse in Ukraine. Crimea secession will deepen the recession in Ukraine and have significant but still sizable adverse impact on the rest of the region. However, should the conflict spread to the Eastern and Southeastern regions, the fallout would be nearly catastrophic for Ukraine. Russia would suffer a major recession, too, with the rest of Emerging Europe likely to be strongly affected due to its high dependence on energy supplies via Ukraine.