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Ukraine crisis could shrink Russian economy by 1.8%: World Bank

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(Globalpost/GlobalPost)

The Russian economy could shrink by up to 1.8 percent this year because of the effects of the crisis in Ukraine, the World Bank estimated on Wednesday.

The World Bank said that if the impact of the crisis turned out to be low because it was resolved in "a peaceful fashion", the economy could grow by 1.1 percent this year.

That is half a previous estimate in December.

But a high-risk outlook "if the geopolitical situation worsens" would result in "a contraction of 1.8 percent in 2014," it said.

The high-risk scenario "projects a contraction in output for 2014 of 1.8 percent as a result of a deeply negative investment shock and further slowdown in consumption growth," it said.

"If the Russia-Ukraine conflict escalates, uncertainty could rise around political and economic sanctions from the West, and Russia's response to them," the World Bank said.

It said that Russian banks could face new restrictions in accessing international capital markets and foreign investors could pull out money amid growing risks and falling profit margins.

It said that even its high-risk scenario "assumes that the international community would still refrain from trade sanctions," however.

The high-risk outlook assumed that there would be a recovery in 2015 with 2.1 percent GDP growth.

The World Bank made the predictions in its twice-yearly report on the Russian economy released in Moscow.

In December, The World Bank had projected growth in 2014 of 2.2 percent, down from its previous projection of 3.1 percent.

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http://www.globalpost.com/dispatch/news/afp/140326/ukraine-crisis-could-shrink-russian-economy-18-world-bank-0