When the war ended, the country was nothing more than a field of ruins. Its industrial infrastructure had been crushed by air raids, its major cities destroyed by bombs, at the cost of terrible human losses. Forces under Russian command were occupying the East, and millions of people were fleeing their brutality. But the West German economy recovered vigorously after 1945, a phenomenon that would soon be called the Wirtschaftswunder (“economic miracle”).
The parallel with Ukraine is not really appropriate. Ukraine is not at the origin of the conflict which is devastating it today. Maybe she will eventually prevail, and even if she doesn’t, she won’t be totally destroyed. Either way, rebuilding will be a monumental task. Vladimir Putin’s war not only left thousands dead and displaced millions, 7.1 million inside [7,7 millions selon un rapport de l’Organisation internationale pour les migrations publié le 21 avril] and 4.6 million abroad [ce chiffre dépassait 5,3 millions le 27 avril selon le HCR]. It resulted in the destruction of homes, hospitals, bridges and ports. And the end of hostilities is not in sight.
By crossing data on property damage, figures on the country’s capital stock and historical comparisons, researchers from the Center for Economic and Policy Research (CEPR), a network [européen] economists, estimated between 200 and 500 billion euros the total cost of reconstruction after the war. The upper range is more than three times Ukraine’s pre-war GDP; the low end is roughly four times the EU’s external aid budget.
45% contraction in GDP
As the war continues, the damage will increase, and the resources to remedy it will dwindle as the economy shrinks. Electricity consumption, a relatively reliable indicator of economic activity, has so far fallen by a third from a year ago. The Vienna Institute for International Economic Studies (Wiiw), a think tank, estimates that the regions directly affected by the war represent approximately 29% production in Ukraine, and that in those areas economic activity has more or less ceased. According to a study by the Central Bank of Ukraine, 30% of companies in the country have stopped production and 45% have reduced it. The World Bank assesses GDP will contract by 45% this year.
The challenge is enormous. Yet how the reconstruction and accompanying reforms unfold will be just as important as the money spent. In principle, such sums could do more than just restore the status quo in Ukraine – a good thing, because that status quo was corrupt.
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