According to the European Bank for Reconstruction and Development, Russia’s economy will shrink by 10 percent this year as the Ukrainian war and Western sanctions cause its worst recession since the early 1990s.

Russia’s gross domestic product (GDP) will also be flat in 2023, the bank said, with very slow long-term growth as overseas buyers Reduce purchases of Russian oil and gas, foreign investors shun the country, educated young Russians emigrate.But so far, its financial system withstood the shock It pointed to retaliatory measures from the West.

“Russia will be hit, living standards will be hit,” said Beata Javorcik, chief economist at the European Bank for Reconstruction and Development. “But in terms of macroeconomic stability, they will be able to weather this shock. The bigger impact for Russia is growth. . . zero growth next year, very low long-term growth.”

The EBRD said the war had triggered the “biggest supply shock” since the 1970s, which would have a “severe” impact on low-income countries far beyond Eastern Europe.

Measures taken by Russia’s central bank since the invasion of Ukraine last month, including sharply raising interest rates and providing liquidity, have helped stabilize the banking system, the report said. But Russia’s energy companies may struggle to service foreign currency debt as overseas revenue shrinks, which could trigger “a more serious financial crisis.”

The latest forecast assumptions of the European Bank for Reconstruction and Development Russia and Ukraine ceasefire “After two or three months, but for the foreseeable future, sanctions will remain in place,” Javorcik said.

The multilateral bank stopped new loans to Russia in 2014 after Moscow annexed Crimea and forecasts a 20 percent decline in Ukraine’s war-torn economy this year.Growth will rebound in 2023, but Kyiv estimates damage to physical infrastructure at $100 billion make the country poorer.

Javorcik warns that a crisis is brewing in emerging markets and low-income countries. Policymakers will be under pressure to increase spending to cushion rising food and energy prices at a time when emerging market currencies are under pressure and interest rates are rising.

“In a world where public finances are already strained, they will have an incentive to continue to provide subsidies, or even increase them,” Javorcik said.

World Bank warn The war could push millions into poverty this week and plunge poorer countries into debt crises.

The European Bank for Reconstruction and Development said North African economies and Lebanon were particularly affected by reduced supplies of wheat from Ukraine and Russia, the world’s two largest exporters. Some will also be affected by fewer tourists from Russia.

In Egypt, dollar-denominated government bond yields rose after the invasion of Ukraine, reflecting its vulnerability to higher food and energy prices

The European Bank for Reconstruction and Development said Turkey needs to import more than 90 percent of its oil and gas, and the lira could come under further pressure. Russians and Ukrainians account for one-fifth of tourists visiting the country.

The EBRD added that the economic impact of the Russian invasion would also ripple through Central and Eastern Europe, with the Baltic countries hardest hit by trade disruptions.