Ukraine may suffer one of the worst falls in GDP after a war, the European Bank for Reconstruction and Development (EBRD) predicts in its 2022/23 Transition Report.

In an analysis of the economic damage done to countries at war, the development bank estimated that in half of the countries growth was still below the trend rate in comparator economies 25 years later. Projections indicate that the contraction in Ukraine’s GDP will be among the worst 10-20% of the conflicts in the last 200 years, the EBRD said.

Estimates of the cost of reconstruction keep rising. An initial study by Kyiv School of Economics (KSE) put the physical damage at $100bn that has tripled since. According to the World Bank, Ukraine's recovery
and reconstruction needs total at least $349bn, which is more than 1.5 times the size of Ukraine’s pre-war economy in 2021. And Ukrainian President Volodymyr Zelenskiy at the end of November said that the cost of the rebuild would be closer to $1 trillion.

The estimates of the size of the contraction of the economy this year are also enlarging. Previously GDP was expected to shrink by 30% but since Russia began bombing the power installations that forecast looks modest and a larger contraction is likely.

In its economic forecast in September, the EBRD forecast that Ukraine’s GDP will fall 30% this year but will start to recover by growing by 8% in 2023. The World Bank last month predicted a 35% fall in GDP this year. The EBRD will make its next forecast in February.

“The big threat to the [September] forecast is the destruction of infrastructure in Ukraine due to shelling by Russia,” chief economist Beata Javorcik told bne IntelliNews in an interview.

Economy Minister Yulia Svyrydenko said in November that the economic forecast for Ukraine might be revised downwards at the Kyiv International Economic Forum, noting that the Ukrainian economy has already fallen 30% even without the mass strikes on power stations.

The EBRD also says that Ukraine cannot expect much foreign investment at the moment, Philip Bennett, former EBRD vice-president, told a panel discussion on the report at the EBRD's new headquarters at Canary Wharf. The "extreme uncertainty for investors" in Ukraine meant that "foreign direct investment is not going to be easy to come by", he said.

Ukraine is unlikely to face a total blackout due to Russian missile strikes. DTEK, one of the nation’s largest power operators, said that Ukraine’s air defences are improving daily, as well as the experience and skill of DTEK’s technicians.

He added that widespread power cuts are necessary to keep the power grid from overloading and allow for repairs to be made, but noted that the chances for a total black-out remains low.

On the diplomatic front calls for peace talks between Russia and Ukraine have gathered momentum, but are unlikely to happen any time soon. There is a growing Ukraine fatigue amongst Westerners, but at they same time the
allies have made it clear that Kyiv is the one to chose when talks are held and
Bankova has taken the firm line it will not negotiate before Russia leaves its
territory.