Written by Sergii Zapototskyi – UVECON, EECFA Ukraine
On 24 February, 2022, Russia, with the support of Belarus, started an open military attack on Ukraine. Since the first days of the full-scale invasion of Ukraine, civilians, ambulances, orphanages, hospitals and residential areas have come under shelling and airstrikes; a deliberate massive violation of international humanitarian law. As per the UN Human Rights Office (OHCHR), between the outbreak of hostilities and 2 May, 6469 civilian casualties were recorded (3153 killed and 3316 injured) in Ukraine and the territories controlled by the partially recognized republics of Donbass. Deceased civilians included 226 children, while the wounded comprised 319 children. In Donetsk and Luhansk regions there were 3241 casualties (1,638 killed and 1,603 injured), including 484 casualties (99 killed and 385 injured) on the territory controlled by the self-proclaimed republics. OHCHR believes that civilian casualties are likely to be ‘considerably higher’, though, especially in Mariupol, Popasnaya, Izium and Borodianka where intense fighting has taken place and is continuing.
The invasion has caused a major migration crisis: according to the UN, as of 26 April, 5.32 million refugees left Ukraine, mostly to Poland (2.848 million), Romania (0.764 million), Russia 0.563 million), Hungary (0.476 million), Moldova (0.429 million), Slovakia (0.346 million), and Belarus (0.024 million). As of 21 March, roughly 6.5 million people became internally displaced, mostly women with children and elderly people. According to UNICEF, more than half of the children in Ukraine have become refugees. At present, according to opinion polls, 73% of refugees seek to return home, but if the war drags on, and the scale of destruction caused by the shelling of peaceful cities by Russian troops increases, the vast majority of migrants will simply have nowhere to return.
The 9 most affected regions account for 30% of Ukraine’s GDP. GDP contraction in 2022 is forecasted to range from 10% to 35%-40% (provided that the occupied territories do not increase, and the active phase will last for several months). These figures correspond to a reduction in electricity consumption of around 35% (published by DTEK, the largest private investor in the energy industry in Ukraine). The sources of at least 70% of Ukrainian GDP remain more or less intact. Total losses of the Ukrainian economy (direct and indirect) due to the war range from USD 564 billion to USD 600 billion. Direct documented damage to infrastructure is estimated at USD 88 billion. In the last week of April, direct losses to the Ukrainian economy due to destruction and damage to civilian and military infrastructure grew by USD 3.1 billion.
In total, 535 kindergartens, 866 institutions of secondary and higher education, 231 medical institutions, 173 factories and enterprises, at least 75 administrative buildings, 277 bridges and bridge crossings, 11 military airfields, 11 airports and 2 ports are damaged or destroyed in Ukraine. There is not a single hospital in Luhansk region with no damage and in places of active hostilities there are military doctors and the wounded and seriously ill are evacuated to safe places. Also, as of the end of April, at least 95 religious and 130 other cultural buildings were damaged, destroyed or seized: 47 religious buildings, 9 museums, 28 historical buildings, 3 theaters, 12 monuments, 3 libraries and more.
Damage to export and agriculture
Export of goods from Ukraine is limited as Russian troops blocked Ukrainian ports in the Azov and Black Seas. Road and rail infrastructure can also transport limited volumes of goods due to the mass evacuation of Ukrainians by railway and roadblocks. By sea, Ukraine transported 62% of the total dollar value of goods, while by rail 12% and by road 23%.
Agriculture is a direct victim of the Russian aggression with the fighting often taking place on Ukrainian fields/farms. About 13% of the territory of Ukraine is covered with landmines plotted by Russians. There is a risk of a protracted war in Kharkiv, Luhansk, Donetsk, Zaporozhye and Kherson regions whose share of wheat production is 23%, corn is 3%, barley is 21% and sunflower seeds is 20%.
The main prerequisite for the post-war economic recovery is for Ukraine to receive reliable security guarantees that hostilities will not resume on her territory. In the absence of this, private investment will be reduced to zero, economic activity will be stifled, and security costs will have to be relied on business, raising the cost of economic activity and undermining competitiveness.
Key goals of the post-war economic recovery should be: i) real estates and infrastructure destroyed or damaged in the war should be restored; ii) economic activity should resume swiftly; iii) refugees and internally displaced persons should return and be involved in economic processes; and iv) foundations for a sustainable economic growth should be established.
In the long run, rebuilding and restoring Ukraine will cost at least USD 600 billion, including not only the restoration of infrastructure, but also the development of a new economy and new European institutions. Options for funding might comprise the frozen assets of the Russian Federation and the European and American funds for the restoration of Ukrainian infrastructure. The EU plans to create a solidarity trust fund to finance the post-war reconstruction of Ukraine (similarly to the Covid-19 recovery fund) and finance investments and reforms in agreement with the government of Ukraine. It is not yet clear how much will be provided through grants or loans as the war in Ukraine still rages on, but the EU told ambassadors that the figure would reach hundreds of billions of euros within decades. The Ukrainian diplomacy should focus on obtaining the EU candidate status and then obtaining full membership; so the program of post-war reconstruction should be harmonized with the tasks of EU membership and ensure the inclusion of Ukraine in the European pre-accession training programs.