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.
- In 2022, the European Bank for Reconstruction and Development (EBRD) invested €1.7 billion in Ukraine and mobilized another €200 million through partner banks. In 2023 , the EBRD will maintain the volume of investments in Ukraine.
- In February, the European Bank for Reconstruction and Development worsened the growth forecast for Ukraineʼs economy from 8% to 1% compared to September 2022. According to EBRD estimates, in 2023 the real volume of production in Ukraine will stabilize at the level of 70% of the pre-war level.