Impact of Military Actions on Ukraine's Economy

Energy Future at the heart of Ukraine's sovereignty In Kyiv, it was impossible last week to ignore talking about the energy supply as the country is racing to secure enough heat and electricity for the winter. But the challenge goes on beyond this winter - without a secure supply of energy people leave, economy breaks, politics cracks. Without energy sovereignty Ukraine’s sovereignty is simply not possible. My visit to Kyiv overlapped with a forecast of the National Bank of Ukraine predicting an increase in emigration of up to 700,000 people in 2024-2025 “due to the significant destruction of Ukraine's energy system, accompanied by prolonged power outages and increasing the risk of the heating season”. The promise of stable energy supply is critical to convince Ukrainians to remain in their country. To bring those who already left back as well. This tragic war is a reminder for all of us that a modern society cannot exist without energy. The consequences of a broken energy system are not measured in blackouts but in number of people leaving the country. The aggressor knows it well. Since April 9200 MW of the country’s energy generation was destroyed: around 80–90% of Ukraine’s energy generation capacity at thermal power plants and around 45% at hydroelectric power plants has been lost. Getting international support for now is critical. And attracting private capital to Ukraine’s devastated energy systems will be key for its swift recovery. Without energy there is no economic activity. The country is ruined. Recent history of Ukraine shows that excessive reliance on oil and gas imports can contribute to spoil politics and impact economy. Healthy economy is based on market prices and free competition. Already much has been done: Energy Community Artur Lorkowski Annual Implementation Report from 2023 estimated that the progress on the markets and integration reform cluster was at 69%. But the remaining part is still critical to be achieved. Transparent energy markets will be as much of the cornerstone for strong and independent Ukraine as today its military forces are. We discussed next steps for the National Energy And Climate Plan just been approved by Yulia Svyrydenko, Ministry of Economy of Ukraine & Oleksii Sobolev, CFA as well as the expert team of Olena Pavlenko, MinEnergy led by German Galushchenko, MinInfrastructure led by Vasyl Shkurakov, MinEnvironment under Ruslan Strilets together with Viktoriia Kyreieva and MinAgriculture with Taras Vysotskyi were all contributing to the plan and are now focused on its delivery along the path of European integration: ·       How to combine surviving the winter & building future energy system? ·       What governance and reforms are still necessary to kickstart investments? ·       How to attract new financial investors and keep engagement of institutional donors? Ukraine’s energy is now at the heart of Ukraine’s survival. It will continue to remain at the heart of Ukraine's sovereignty.

The Fifth Ukraine Rapid Damage and Needs Assessment (#RDNA5) was launched this week in Kyiv. Even after years of analyzing these figures, the sheer scale is undeniably staggering. As of 31 December 2025, direct damage across Ukraine has reached $195 billion — an 11% increase over the past year. Looking ahead, recovery and reconstruction needs are estimated at $588 billion over the next decade. These figures are not abstract. They represent homes, transportation links, energy systems, and livelihoods that millions of Ukrainians depend on every day. The largest impacts are clear: ·      Housing: $61.1B in damage and $89.8B in recovery needs ·      Transport: $40.3B in damage and $96.3B in needs — now the single largest sector ·      Energy: $24.8B in damage and $90.6B in recovery needs ·      Commerce & industry: $19.2B in damage and $63.3B in needs In our #RDNA5, I see recovery evolving beyond simply replacing what was destroyed. For me, it’s about rebuilding systems that can generate growth, create jobs, and sustain long-term transformation. It can be structured around three key rebuilding pillars. The first pillar is private-sector-led recovery. Investment doesn’t happen by accident — it requires preparation, risk mitigation, and credible rules. These are not technical footnotes; they are the foundations of job creation. The second pillar is social sustainability in jobs. Recovery must translate into real opportunities for IDPs, returnees, veterans, women, and young people. Jobs don’t automatically follow reconstruction, which is why RDNA5 links housing and industrial investments directly to skills, labor demand, and workforce development. The third pillar is an area-based approach. By responding to local realities and labor markets, recovery can rebuild communities, support local firms, and restore economic life where it matters most. RDNA5 is also a reminder of what a strong partnership can achieve. This assessment reflects the leadership and ownership of the Government of Ukraine and sustained collaboration with the United Nations, the European Commission, and us, the The World Bank Bank Group. Delivering analysis of this depth during Russia’s ongoing invasion is an extraordinary achievement. Learn more: https://lnkd.in/ezQBtBug Photos: World Bank; Ukraine Ministry for Development of Communities and Territories of Ukraine; Sergii Drobysh Yulia Svyrydenko Anna Bjerde Alfonso García Mora Sergii Marchenko Oleksii Sobolev, CFA Alona Shkrum

For the first time since the war began, the KSE Institute is analyzing the future of Ukraine's economy. We've regularly analyzed Russia’s economy to offer an alternative to the optimistic IMF forecasts, which are based on data provided by Russia itself. But this is the first time we've created a forecast for Ukraine. It required a lot of serious work, and we’re very proud of it. Thank you to the authors (pictured), and now for the forecast itself: Economy and Recovery: Ukraine’s real GDP in 2027 will still be 10% below pre-war levels. Real wage growth: -11.3% (2022) → +3.6% (2023) → +14.1% (2024) Unemployment: 21.1% (peak in 2022) → 18.2% (2023) → 14.1% (2024) → ~10% by 2027 The number of job vacancies is growing despite population decline. Highest salaries are in sectors like IT, construction, and defense industries. Energy: Power generation capacity has halved to 18 GW. Damage to the energy sector totals $11 billion. Electricity shortage in winter 2024/25: 15-30% of peak demand. 88% of companies are prepared for potential blackouts. Diesel generator electricity costs ~25 UAH/kWh. Projections: Dollar exchange rate: 42.6 UAH (end of 2024) → 48.6 UAH (2027). Inflation will remain above the target level of 5% until 2027. Financial assistance needed: $90 billion by 2027.

Since 2023, The World Bank has been conducting the Listening to Ukraine (L2UKR) phone surveys in collaboration with the Kyiv International Institute of Sociology. The latest Fall 2025 Update reveal that: - #Poverty and #inequality are on the rise, with 36.9% people living in poverty and a Gini coefficient that went from 0.41 in 2023 to 0.50 in 2025; - Vulnerable groups are increasing with 9.2% of households reporting at least one disabled household member due to injuries related to the current circumstances; - The persistence of labor market frictions with 13.1% of working-age adults reporting job loss in 2025; - And the deepening of regional inequalities expressed in regions under active hostilities reporting higher food insecurity and asset losses. The L2UKR initiative is a source of reliable #data to assess the dramatic impact of military conflicts on households’ #wellbeing. Prepared by Obert Pimhidzai, Avralt-Od Purevjav, Britta Rude, Wondimagegn Mesfin, and Judy Yang, under the guidance of Ambar Narayan, this note offers valuable insights and is well worth a read: https://lnkd.in/e4NHNxpY

In almost two years, Russia's full-scale aggression has led to significant economic and social losses for Ukraine, totaling almost $499 billion. These findings are from the third analysis of Ukraine's damages and needs (RDNA-3), conducted by The World Bank and the Cabinet of Ministers of Ukraine in cooperation with the European Union, the United Nations, and other partners, including the team of the Ministry of Economy of Ukraine. Ukraine's recovery needs are currently estimated at $486 billion. 📍The private sector alone needs $5.8 billion this year to restore industry and commerce. The results of the third analysis will guide the implementation of the Ukraine Plan, focusing on necessary reforms and the Ukraine Facility. This plan includes introducing an investment mechanism to enable the private sector and state-owned companies to attract financing for investment projects. Restoring the private sector is our key priority. The investment needs of industry and commerce amount to $4.2 billion, with working capital needs totaling $1.6 billion. We must finance this amount together with our international partners. Key financing directions provided by the government, donors, and international financial organizations this year include grants for business restoration and modernization, partial interest rate compensation through the 5-7-9% program, support for Ukrainian exporters, insurance programs against war risks, and crucially, financing for capital investments and equipment upgrades for Ukrainian businesses. Particularly important is the availability of instruments for companies through the banking system, including corporate financing and project financing. This is especially true for capital-intensive industries that need to upgrade production lines, such as the manufacturing industry.