Russia’s full-scale invasion of Ukraine has caused massive destruction of civilian infrastructure. This includes a wide variety of assets and sectors, including housing, roads, ports and airports, power plants, businesses, as well as social infrastructure such as schools and hospitals.

While some assets were targeted deliberately such as Ukraine’s energy infrastructure, others were collateral damage or stolen by the aggressor. As of January 1, 2024, according to the World Bank’s third Rapid Damage and Needs Assessment (RDNA3), for which KSE Institute provided important inputs, total damages stood at $152.5bn.

An updated full assessment will only be available with RDNA4 but we believe that damages have likely risen by around 10% over the past 12 months. Damages are highest in the housing and transportation sectors (see Figure 37), but the sector that suffered the largest damages in 2024 was energy, where the total rose from $10.6bn to $16.1bn H1 alone, and is now likely even higher due to persistent Russian airstrikes.

The war has also led to significant losses due to its impact on business activity. As of January 1, 2024, total economic losses amounted to $499.3bn according to the World Bank. They are heavily concentrated in productive sectors such as industry, commerce and agriculture.

While a large share of direct damages occurred during the first months of the full-scale invasion, losses are proportional to the time passed and their accumulation has not slowed down. We estimate that total losses could reach more than $1 trillion by the end of 2025. The cost of reconstruction and recovery was estimated at $486bn in the RDNA3.

This estimate includes the reconstruction of damaged and destroyed assets, which is assessed using a so-called Build Back Better principle, meaning that assets should not be restored to their previous, often outdated state, but in compliance with contemporary standards regarding security, energy efficiency and accessibility. In addition, it includes the costs of recovering economic activity due to liquidity needs arising from losses, additional social payments, as well as expenses for demolition, debris removal and demining.

Reconstruction makes up roughly 60% of the total and recovery 40%. Housing, transport, industry and commerce, agriculture, energy, social protection and demining have the highest needs (see Figure 37).

It is reasonable to assume, based on the trajectory of needs in 2023, that the total has now risen significantly above $500bn. Investment over 2025-27 will be insufficient to address reconstruction and recovery requirements.

Total gross fixed capital formation (in 2023 $) is estimated at $100bn over the three years of the forecast period. This amount will not allow Ukraine to fully recover economically, and real GDP will remain almost 10% below its 2021 level in 2027. The key objective for 2025 and beyond is to secure additional funding from domestic as well as external sources – and the confiscation of Russian sovereign assets should play a key role.

The cost of damage to Ukraine’s economy and needed funds to rebuild $bn

The Kyiv School of Economics (KSE) is a bne IntelliNews media partner and a leading source of economic analysis and information on Ukraine. This content originally appeared on the KSE website.