Ukraine is now preparing for a possible major attack by Russia, but at the same time, the reconstruction of the country is already being planned in many different configurations.
One of them is located in London, where the European Bank for Reconstruction and Development, or EBRD, has its headquarters.
– We need to focus on the fact that we are now supporting Ukraine while the war is going on, but at the same time we need to plan for reconstruction, says the EBRD’s chief economist Beata Javorcik In an interview with .
He emphasizes that the reconstruction of Ukraine cannot be taken for granted. The road will be difficult.
According to Javorcik, there are three boundary conditions that define the initiation of reconstruction. First, some kind of lasting solution to the conflict must be found.
– So no more bombs can be dropped on Ukraine. Secondly, institutional reforms must be made in Ukraine. Third, there must be capital.
“Human capital equally important”
Before the start of the war, the EBRD was the largest institutional investor in Ukraine. It had more than 100 employees in Ukraine, who now work mainly in the bank’s offices in other countries.
Between last year and this year, the Reconstruction and Development Bank is granting a total of approximately three billion euros to Ukraine.
– I see that we are now also directly supporting Ukraine’s reconstruction efforts, says Javorcik.
– Most of the reconstruction discussion focuses on physical capital, but equally important is human capital, i.e. people and their skills. People who can build Ukraine.
According to Javorcik, living conditions in Ukraine must be made as tolerable as possible. In this way, it can be avoided that millions of Ukrainians have to leave their country again.
According to estimates, more than eight million Ukrainians have already fled to different parts of Europe. That’s almost a fifth of the country’s population.
– When refugees leave, a certain part will never return.
In terms of Ukraine’s overall needs, the amount granted by the European Bank for Reconstruction and Development is small. In the fall, the World Bank estimated that at least 350 billion euros would be needed to repair the damage caused by the war. Now the need is probably much greater.
The EBRD’s pot for Ukraine is also quite small when compared to the sums that many states and other international financiers have granted to Ukraine.
Ukraine’s share of the bank’s entire operations is only about ten percent. With the same amount, the EBRD also supports, for example, autocratically run Turkey.
Ukraine’s economy has collapsed
Chief Economist Beata Javorcik joined the European Bank for Reconstruction and Development in 2019 from the University of Oxford, where she still holds a position as Professor of Economics.
According to Javorcik, Ukraine’s economic outlook is difficult.
When the fighting was at its fiercest a few months ago, the war was being fought in an area where 60 percent of Ukraine’s gross domestic product is normally produced, says Javorcik.
Now the situation is a little better. According to Javorcik, the fighting extends to the area where about 20 percent of the country’s gross domestic product was produced in the past.
– In the last few months, however, we have also seen bombings of Ukraine’s vital infrastructure. There have been power outages, difficulties in supplying water and heating homes.
According to estimates, Ukraine’s gross national economy shrank by around 30 percent last year. The drop is huge, the biggest during the entire period of Ukrainian independence.
The development of this year’s gross national product depends on how the war progresses. However, according to Javorcik, it is likely that the size of the economy will remain roughly the same as last year, meaning that a major collapse is hardly known.
The long-term outlook is still inconsolable. The aftermath of the war will be visible in Ukraine for a long time, even decades.
Javorcik says that the European Bank for Reconstruction and Development has assessed the long-term economic effects of wars between two states on the country where the fighting takes place. In half of the cases, the war was reflected in the development of the country’s gross national product even 25 years after the end of the war.
– War shrinks the country’s population, slows population growth, destroys capital and increases indebtedness.
One thing gives hope
Although it will be difficult for Ukraine to emerge from the hole caused by the war, Javorcik is also hopeful.
Finland is one of the shareholders of the European Bank for Reconstruction and Development. That’s why Javorcik made a visit to Helsinki. Before the interview with , he has met with representatives of Finnish business life.
Javorcik emphasizes that the private sector will be needed in the reconstruction of Ukraine. He is pleased that so many companies have presented their solutions for getting Ukraine back on its feet.
Javorcik is especially hopeful because Ukraine wants to become a member of the European Union.
According to Javorcik, the membership drive is an “anchor” thanks to which Ukraine is more committed to making reforms essential for reconstruction, for example to its administrative system.
Last year, the EU prepared for Ukraine a list of seven conditions that the candidate for membership must fulfill before joining. They concern reforming the judiciary and work against corruption, oligarchs and money laundering. The conditions also include reforming the legislation on the press and civil minorities.
Making reforms is always difficult, says Javorcik.
– If Ukraine has a big prize that can await it after the reforms, the public debate will be more focused and then it will be less likely that populist interests will derail the reforms. This gives me hope that Ukraine will succeed in reforming its institutions.
Hear more about:
Read more:
Ukraine wants to become a member of the EU in two years, but according to an expert’s estimate, it will take at least ten years
You can discuss the topic on 10.2. until 11 p.m.