More than two weeks have passed since the beginning of a full-scale Russian attack on Ukraine. Ukrainians have been courageously and devotedly fighting in the war which concerns not only our country, but the security of Europe and the world as well.
Many experts, economists, and consultants have joined forces on the platform of the Center for Economic Recovery to inform the international community about the events of the Russian war against Ukraine.
CIVITTA and EasyBusiness experts joined the work group coordinated by CER and conducted a rapid assessment of the costs of the war for the economies of Russia and Ukraine; they prepared a list of possible actions on how the international community can help our country survive and win this war.
Already in the first 4 days of war, Russia's economy has suffered losses that would push back its development decades ago:
- According to the most conservative estimates, the direct losses from the war alone (liquidated military equipment and personnel) cost Russia about $7 billion. In the first 4 days of war, loss of human lives alone will cost the country more than $2.7 billion in lost GDP in the coming years (a very conservative estimate). The total daily cost of war for Russia is likely to exceed $20-25 billion given logistics, personnel, rocket launches, etc.
- As a result of sanctions pressure, the financial sector of Russia has suffered irreparable losses. Russian companies are rapidly losing market capitalization. New limitations on government bonds’ trading and freeze of central bank assets make it very difficult for Russia's criminal authorities to maintain macro stability and service their sovereign debt. However, the world has even more levers to limit the Russian economy, namely through the full-scale disconnection of the country from SWIFT (not a partial one) and exclusion of Russian companies from foreign capital markets – actions yet to be taken.
- Trade restrictions have a significant impact on Russia's energy-dependent economy. Sanctions have already been imposed on Nord Stream 2 leading to lost future revenues. The ban on high-tech products’ import will destroy value chains and destroy Russian competitiveness, though in the medium- and long-term only. Again, the world should be more aggressive here – logistics limitations (incl., closing ports and airports for Russian ships and airplanes) and full-scale oil and gas embargos would be a logical next step. Such embargo alone could cost the country up to $142.8 billion in lost revenue
- And finally, Russian ordinary citizens will suffer. Due to the fall of the ruble, real incomes have already fallen more than twice. With the freeze of central bank assets, Russia is likely to face the biggest crisis ever in its history. Russia is already a pariah state – limited flight connection, no sports events, flags and anthem banned at multiple events, foreign companies voluntarily breaking ties with Russia, etc. The country’s image will likely have a spill-over effect for its citizens making them perceived as outcasts from global civilization as well.
At the same time, Ukraine needs support from the international community to overcome the consequences of the war. Ukraine's economy, which has only just begun to recover from the effects of the COVID-19 pandemic, now faces an even greater threat. We call on international partners to provide support to Ukraine in resolving the humanitarian crisis and provide military support, as well as macro-financial assistance to stabilize the economic situation.
More details of the study can be found in this report. You can read the latest updated numbers on the economic impact of the war here.