The Polish Economic Institute (PIE) has prepared a report ‘War Economy: Ukraine one year after the Russian invasion’, which shows that the war has devastated the Ukrainian economy. GDP in 2022 was nearly 30 % lower and unemployment exceeded 25 %. Around 50 % of Ukraine’s energy infrastructure was destroyed, with 40 % of companies reducing production as consequence. The area of sown fields fell by 30 %. Ukraine’s defence spending increased by 9 times. At the same time, foreign direct investment has fallen significantly – from over USD 7 billion in 2021 to just USD 190 million in the first three quarters of 2022.

PIE points out that the economic consequences have added to Ukraine’s problems resulting from, for instance, the loss of part of its territory, the destruction of energy infrastructure or the blockade of trade routes.

In 2022, Ukraine’s GDP fell by 29.1 %. Ukraine’s economy had to switch to war mode. 42.2 % of budget expenditure is allocated to defence in 2022.

The costs caused by aggression have already been borne by Ukraine since 2014, when Russia began its occupation and subsequent annexation of Crimea and parts of territory in eastern Ukraine. “Ukraine’s total losses due to lost economic potential between 2014 and 2022 are estimated to be close to USD 740 billion”, said Dominik Kopinski of PIE’s global economy team.

According to him, the reconstruction experience of other countries indicates that it may take 25 years for GDP per capita to return to the level set by the pre-war growth trend.

At the beginning of the war, more than 80 % of businesses in Ukraine had almost completely suspended their activities, but one year after the invasion it was only 27 %. “However, the improved sentiment among Ukrainian companies does not mean a better outlook for economic prosperity”, the PIE analyst added.

Adrian Andrzejewski