Near-term estimates for Ukraine’s economy are markedly frigid, but some investors maintain solid faith that the country will bounce back stronger than ever once the war is won.
According to Gintarė Narkevičiūtė-Jurgelionė, a finance and investment specialist who also coordinates humanitarian assistance to Ukraine from Lithuania: “The war will certainly take time to recover from, but Ukrainians are incredibly resilient.” She adds that “the war is a setback, not the finale.”
Earlier this week, the Kyiv School of Economics issued a forecast estimating the current direct costs of the war on Ukraine at around $80 billion. This estimate is based on evidence that the Russian invasion has “destroyed, damaged, or seized” an estimated:
- 3,000 kilometers of roads;
- 37,000 square meters of real estate;
- 319 kindergartens;
- 205 medical institutions;
- 546 educational institutions;
- 145 factories;
- 54 government administration buildings;
- 277 bridges and bridge crossings;
- 10 military airfields, 8 airports and 2 ports;
- 62 cultural buildings; and
- 74 buildings used for religious services.
Since the beginning of Russian President Vladimir Putin’s war on Ukraine, the United Nations estimates that nearly 11 million Ukrainians (roughly a quarter of the population) have been displaced from their homes. Among these, 4.3 million have fled their homeland, in addition to an estimated 6.5 million who are now internally displaced.
This surge of Ukrainian refugees has created a crisis across Europe as countries struggle to keep up with the influx of people. Poland, which has taken in around 2.6 million refugees, has asked for assistance from European allies to meet demand on resources.
Across the Atlantic, the U.S. has yet to develop a plan for Ukrainian refugees, despite the Biden Administration’s promise to accept 100,000 people. International organizations believe that the outflow of Ukrainian nationals will not decrease anytime soon.
Such dramatic population shifts can create long term pain for recovering economies. The Kyiv School of Economics and the Ukrainian Ministry of Economics warn that the indirect costs of the invasion could be 700% higher than the direct costs of the war. In a joint statement, an estimated combination of direct and indirect costs, which includes things such as “GDP decline, investment cessation, outflow of labor, additional defense and social support costs,” could be in the ballpark of “$564 billion to $600 billion”.
Dan Rapoport spent almost 20 years working as an investment banker in Moscow before moving to Kyiv, where he now supports Ukrainian defense efforts. He believes that the surge of “Russian money and Russian Government money to rebuild” will lead to the growth of the new, post-war Ukrainian economy. According to Rapoport: “There is almost a trillion dollars of frozen Russian funds worldwide, including personal sanctioned funds and Central Bank funds. These funds will eventually be transferred to Ukraine as compensation after a court decision showing Russia’s culpability in the war.” Rapoport expects massive international aid to contribute to rebuilding the Ukrainian economy.
Many experts agree with Rapoport’s analysis and believe that, when the war concludes, Ukraine will get back on its feet, experience strong economic growth and move closer to fulfilling its longtime quest to join the European Union.
Narkevičiūtė-Jurgelionė observes that “Ukraine’s relations with the EU have never been closer.” She believes that this will lead to rebuilding the Ukrainian economy because “when Ukraine is able to bring its commodities to the European market, we can expect foreign investment to flow into the country.”
Dr. Tom G. Palmer is co-author of ‘Development with Dignity’ (London: Routledge, 2022), Executive Vice President for International Programs at the Atlas Network and Senior Fellow at the U.S. based Cato Institute. He highlights that Ukraine must follow the 20th century post-war examples of other European countries if it wishes to experience a rebirth, stating: “It will be reborn, if it follows Ludwig Erhard and Luigi Einaudi, who liberalized the statist economies of Germany and Italy after the war.” Palmer reminds us that this was key to the development of those nations as “they abolished price controls, entry restrictions, crushing bureaucracy, state companies and freed the enterprise of everyday humble people.” He cautions that otherwise, there is a risk of “perpetual vassalage to Russia.”
Maryan Zablotskyy is an economist turned member of parliament from Ukrainian President Volodymyr Zelensky’s Servant of the People party. He shares Palmer’s view that the opening of markets, namely the European market, will be key to Ukraine’s recovery. He asserts: “Ukraine will now definitely become part of the EU. With access to the single market and the cheapest labor by far, any business making goods for the EU market will become very profitable.”
Narkevičiūtė-Jurgelionė summarizes the current situation by saying that “today, when Ukraine is discussed in the press, the main focus is the latest news from the battlefield and not the future.” However, she adds that “Ukraine is incredibly forward looking” and that it “has a great economic future on its horizon.” She concludes: “I know investors who have said that the day that the war ends, Kyiv is the first place they will go.”
The views expressed in this article are those of the author and not necessarily those of the Kyiv Post.
