The war has caused enormous damage to Ukraine’s economy, industry, and business landscape. Better than before: the aftermath of the war and the path to recovery for the Ukrainian economy Economic development
The war has brought unprecedented hardship to Ukraine’s economy, but the country also has unique opportunities for sustainable recovery, according to a study prepared by the United Nations Industrial Development Organization (UNIDO).
Despite the large-scale challenges, Ukraine’s economy has demonstrated impressive resilience and continues to function, the authors of the report emphasize. However, targeted efforts will be needed to steadily improve the population’s standard of living, accelerate the recovery process, and reduce the income gap with other countries. In addition to eliminating the consequences of the war, it is necessary to change the conditions that led to economic stagnation in the years before the full-scale invasion of the Russian Federation, the experts noted.
Economic Recovery
Ukraine is a middle-income country with good growth potential, says UNIDO report. Fertile land, natural resources, strategic geography, culture and skilled workforce are all prerequisites for success, but war is making its own adjustments.
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Facing a full-scale Russian invasion, the Ukrainian government adopted a National Recovery Plan in 2022. It sets out key guiding principles, including a “build back better” approach that enables stronger, safer and more resilient infrastructure and governance systems.
In addition, the government has identified five priority areas: energy facilities, demining, the private sector, housing, and vital and social infrastructure.
Economic Shock
The war has inflicted severe economic damage on Ukraine. Gross Value Added (GVA), according to a UNIDO report, has fallen by 21 percent. According to researchers, this was a consequence of widespread destruction, disruption of supply chains, and loss of access to key resources and markets. In addition, the number of jobs has fallen by 29 percent, exacerbating the hardships faced by the country’s population.
The most significant shock to the Ukrainian economy occurred in the first months after the full-scale invasion, the report says. This includes the destruction of production capacity, the halting of investment projects, a decline in domestic demand, the destruction of transport infrastructure, the blocking of ports, restrictions on cross-border foreign exchange payments, a reduction in the number and variety of manufactured goods, a shortage of imported energy resources, inflationary pressure and currency devaluation.
Large-scale attacks across Ukraine have resulted in deaths and destruction of infrastructure.
Despite the challenges, however, the researchers highlight the resilience of certain sectors of the Ukrainian economy and offer a strategic approach to its recovery. Ukraine is seeking to meet European Union standards and integrate more deeply into global value chains, and this process will not be easy.
Industry in Crisis
Ukraine’s industrial sector, once the backbone of the economy, has been particularly hard hit by the war. In particular, the metallurgy sector, which historically contributed significantly to the country’s GDP, has been devastated by the conflict, according to the UNIDO study.
With production facilities concentrated in Ukraine’s eastern regions, many have been destroyed or severely damaged. The international competitiveness of Ukraine’s base metals, once a strength of the economy, is now at risk. The report highlights the need for significant investment in rebuilding the sector, with a focus on modernization and greener practices.
Food and beverage production, unlike metals, is less geographically concentrated, which has protected it to some extent from the full brunt of the conflict. The sector remains critical to Ukraine’s economic recovery and has significant potential for integration into European value chains, the report’s authors emphasized. However, challenges remain, including disparities between large and small producers, which could hinder a full recovery.
Entrepreneurs under attack
The war has had a major impact on entrepreneurship in Ukraine, experts say. Many small and medium-sized businesses have been destroyed or forced to relocate, leading to significant financial losses and operational problems.
Garbage collection in Bucha.
Access to finance is severely limited, and the collapse of foreign and domestic investment has left many businesses without the resources they need to rebuild or innovate. The report highlights the need for a comprehensive support programme, including loans, grants and technical assistance, to help businesses recover and contribute to a broader economic recovery.
Environmental Impacts
The report also looks at the environmental impact of the war, which has been significant. The destruction of infrastructure has led to an 18 per cent drop in resource consumption and a 20 per cent reduction in carbon emissions. However, this is not necessarily a positive trend, experts say, as it reflects a broader economic collapse rather than sustainable practices.
The report highlights the rising concentration of emissions and the material intensity of the economy, caused by the disruption of supply chains and the occupation of key industrial regions.
Forests and land use have also suffered from the destruction of infrastructure and increased logging. The authors call for a clear legal framework to address environmental issues, emphasizing the importance of sustainable practices in Ukraine’s agro-industrial sectors.
Ukrainian lands contaminated with mines.
The Path to Recovery
UNIDO experts conclude that rebuilding the Ukrainian economy will require a dual approach: addressing immediate needs through targeted investments in critical sectors while laying the foundations for long-term sustainable growth. This includes bringing manufacturing into line with EU standards, introducing greener industrial practices, and promoting innovation across all sectors.
The war has taken a heavy toll on the country’s economy, industry, and business landscape. However, with a strategic approach focused on reconstruction, modernization, and sustainable practices, Ukraine has a path to recovery.