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The EBRD calculated how much foreign investment Ukraine needs for rapid post-war recovery

Author:
Anna Kholodnova
Date:

For rapid recovery, Ukraine needs foreign investments in the amount of $50 billion annually for five years.

This is stated in the report of the European Bank for Reconstruction and Development (EBRD) "Regional Economic Prospects".

According to it, 29% of post-conflict economies reach their pre-war level of gross domestic product (GDP) per capita within five years.

For Ukraine to recover during this period, its economy must grow by 14% per year for all five years. This would raise average GDP to $225 billion from about $150 billion in 2022 at constant prices.

The main feature of periods of stable and high economic growth is a high ratio of investments to GDP.

"Before the war, moderate investments in Ukraine were mainly financed by domestic savings. Capital inflow was only 3% of GDP per year in 2010-2021. And foreign direct investment, as a rule, falls significantly after the end of the conflict and takes a long time to recover," the EBRD notes.

Now, to cover the difference between the required level of investment and available domestic savings, external financing (net capital inflows) of 20% of GDP or $50 billion per year is likely to be required.

The Bank also emphasized the importance of a balance between the private and public sectors, along with the important role of foreign aid.

"Private and public investment tend to complement each other, in post-conflict situations and in general. In addition to financing, the private sector provides much-needed technological expertise, management know-how and a focus on economic efficiency," the EBRD stated.