Reconstruction of Ukraine

The US government is applying pressure to achieve peace or at least a ceasefire in Ukraine as soon as possible. To this end, direct negotiations with Russia are planned, apparently without the EU and with unclear participation of Ukraine itself. It is difficult to assess whether a rapid end to the fighting can be achieved under these conditions. Nevertheless, the costs of reconstruction in Ukraine are already becoming the focus of interest. We will attempt to provide some rough guidelines for the scope of the reconstruction effort.

War damage in Ukraine...

Estimating the funds needed for reconstruction begins with an appraisal of the damage caused. The most devastating aspect of war is, of course, the human cost: the dead, wounded and otherwise injured. We will focus here on the enormous material losses, based on the Rapid Damage and Need Assessment (RDNA) of the war damage presented by Ukraine together with the EU, the World Bank and the UN. So far, three such estimates have been published, the last one a year ago:

• Direct damage. This refers to the destruction of housing, infrastructure or production facilities. At the end of 2023, around 10% of Ukraine's housing was damaged or destroyed, for example. All in all, direct damage is estimated at over $150 billion. After another year of war, it is now likely to exceed $200 billion.
• Indirect losses. Combat operations and displacements lead to production stoppages and harvest losses. By the end of 2023, 5.9 million refugees from Ukraine were registered in other European countries, in addition to 3.7 million internally displaced persons. Furthermore, up to one million persons are serving in the Ukrainian army. Millions of people have thus been removed from the labor market in Ukraine. These people have therefore not been able to contribute to value creation at all, or at least not to the usual extent, in the last three years. Lost teaching and training hours also have economic follow-up costs. The indirect damage is significantly higher than the direct damage and is estimated at around $500 billion at the end of 2023.

Unlike direct damage, indirect damage ("losses" in the RDNA analyses) can only be partially compensated for later on – a failed harvest, for example, is irretrievably lost.

For full text see attached PDF-Version.