The economic costs of the war are huge. Here’s who lost the most money between Russia and Ukraine.
The Russia-Ukraine conflict has brought with it thousands of lost lives, but also huge economic costs.
According to World Bank estimates, Putin’s "special military operation" has caused direct damage of 152 billion dollars in Ukraine since February 24, 2022.
Almost two and a half years after the start of the war, the number of victims amounts to tens of thousands, thousands have abandoned their homes and entire cities have been razed to the ground.
The material damage caused by the war, which began in Moscow on February 24, 2022, is estimated at hundreds of billions of dollars.
The economic cost of the war for Ukraine
A report by the International Rescue Committee (IRC) released earlier this year estimated that around 14.6 million Ukrainians will require humanitarian assistance in 2024, including 3.7 million displaced people.
The report found that from February 2022 to early 2024, over 4,000 attacks on educational facilities and over 1,300 attacks on health facilities were recorded, while over 1.5 million homes were destroyed.
As of December 2023, the UN projected the total cost of reconstruction and recovery in Ukraine to be around US$486 billion, up from the previous estimate of US$411 billion in 2022.
The IRC report also revealed that an area the size of Romania is now littered with landmines and that the explosion of the southern Nova Kakhkova dam in June last year left 600,000 hectares of arable land without irrigation.
According to the Kyiv-based Center for Economic Strategy (CES), the unemployment rate in Ukraine, which stood at around 10% before the war, rose to over 30% during the conflict, before falling to the current 17%. By 2024, it is expected to fall to 14.51%.
Hunger has also been and remains a significant problem, with food insecurity rising from 30.3% to 19.2%.
At the start of 2022, exports and imports were moving at similar levels, around $7.5 billion. However, the trade balance plunged into negative territory with the onset of the war. It stood at minus $3.7 billion in December 2023.
Wheat exports were hit particularly hard, but rebounded to near-pre-war levels with the signing of the Black Sea Grain Deal, brokered by Turkey and the UN in July 2022. The agreement, initially set for a period of 120 days, was renewed several times before Russia finally pulled out in July 2023.
Ukraine’s annual inflation rate, which stood at 10% in January 2022, rose to 26.6% in October 2022 and is currently at 4.7%. Inflation in Ukraine is expected to be 8.2% in 2024,
After growing by 6.3% in the last quarter of 2021, the country’s economy contracted by 14.9% in the first quarter of 2022, by 36.9% in the second quarter, by 30.6% in the third quarter and by 31.4% in the last quarter.
After falling by 10.3% in the first quarter of 2023, Ukraine’s GDP recorded its first positive GDP growth rate, at 19.5%, in the second quarter of 2023. It remained at a growth rate of 9.3% in the third quarter and 6.5% in the last quarter of 2023, according to CES estimates. According to the IMF, Ukraine’s GDP will grow by 2.5-3.5% in 2024.
"In 2024 alone, Ukrainian authorities estimate that the country will need about $15 billion for immediate reconstruction and recovery priorities at both the national and community levels, with a focus on private sector support and mobilization along with the restoration of housing, infrastructure and services, energy and transportation," the World Bank said earlier this year, adding that from the start of the war to the end of 2023, "direct damage in Ukraine has now reached nearly 152 billion dollars, with construction, transportation, trade and industry, energy and agriculture being the most affected sectors."
The economic cost of the war for Russia
Annual inflation in Russia, which before the war stood at around 9%, rose to between 11 and 17.8% in the first year of the conflict. After a period of double-digit inflation, it has fallen to 2-3% due to interest rate hikes by the country’s Central Bank. It has gradually increased from 2.3% in April 2023 to 7.4% in January 2024. Inflation is expected to close in 2024 at 6.9%.
The Russian Central Bank lowered the interest rate from 20% to 7.5% from March to September 2022 but had to gradually increase it after July last year, to the current 18%.
The risk premium on the country’s credit default swaps (CDS) has skyrocketed to around 13,800, having remained unchanged before the war at around 200.
A recent Pentagon estimate, reported by Japanese public broadcaster NHK, shows that the cost of the war for Moscow so far amounts to 211 billion dollars, needed to equip, deploy, maintain, and sustain operations in Ukraine.
It is also estimated that the Russian military has suffered 310,000 military casualties and that Ukrainian forces have sunk, destroyed, or damaged at least 20 medium and large Russian Navy vessels.
In addition to military spending, the Russian economy has been hit by Western embargoes and sanctions.
The Central Bank of Russia’s reserves, amounting to more than 320 billion dollars, have been frozen since the beginning of the war by Brussels, together with the G7 countries and Australia.
Furthermore, according to a report published by the European Council in May 2023, 70% of Russian banking assets and around 20 billion dollars of assets carried out by more than 1,500 individuals and companies are subject to Western sanctions.
After Russia started the conflict in Ukraine, several sectors and countries announced sanctions or suspensions against it. Some companies stopped operations and exports to Russia, while others stopped investments or withdrew partnerships with Moscow and Belarus.
The share of the Russian government budget for national defense increased by 23%, from 21% in 2022 and 20% in 2021. The country’s military spending continued to increase uninterruptedly in 2023 and 2024.
The economic damage to both countries is enormous. While Ukraine is penalized by exorbitant reconstruction costs, it is supported by the West in terms of military equipment, liquidity, and humanitarian aid. Russia, on the other hand, has seen military spending skyrocket and has been exposed to the effects of sanctions, even though Putin has so far been able to find alternative ways to support its economy, which at the time of the outbreak of the war was coming from consecutive years of steady growth.
Original article published on Money.it Italy 2024-08-12 18:21:00. Original title: Chi ha perso più soldi tra Russia e Ucraina dall’inizio della guerra
