Cost to Ukraine of Conflict with Russia

Cost to Ukraine of Conflict with Russia

The conflict with Russia has cost Ukraine US$280 billion between 2014 and 2020 according to report by Cebr

  • New analysis by Cebr shows that Ukraine’s lost output between 2014 – 2020 attributable to the conflict with Russia totals US$280 billion, or up to US$40 billion a year, 19.9% of Ukraine’s pre-conflict GDP
  • The 2014 annexation of Crimea alone is worth up to US$58 billion in lost GDP to Ukraine
  • The ongoing conflict in Donbas has cost Ukraine up to US$14.6 billion a year between 2014 – 2020
  • The conflict has had a major impact on trade and investment, and has led to substantial losses of assets and tax revenues

10 February, London – The conflict with Russia has cost Ukraine US$280 billion in lost GDP between 2014 and 2020, new research by the Centre for Economics and Business Research (Cebr) for the Ukrainian Government finds.

The conflict, which effectively started in 2013 with severe political and economic pressure on Ukraine around its EU Association Agreement, has been costing Ukraine annually 19.9% of its pre-conflict GDP since 2014, with the impact in Donbas, where there is an ongoing conflict, amounting to US$102 billion cumulatively, or up to US$14.6 billion a year. The 2014 annexation of Crimea alone is costing Ukraine up to $8.3 billion in annual terms.

The report, the most up to date and authoritative study of its kind, confirms that the ongoing conflict has had a substantial impact on Ukraine’s economy. It has reduced investor confidence in Ukraine’s economy, which in turn has led to a loss of US$72 billion of investment or up to US$10.3 billion annually, while an ongoing downward push on the country’s exports has resulted in total losses of up to US$162 billion from 2014 – 2020.    

The cumulative capital losses in Crimea and Donbas from assets lost or damaged are worth US$117 billion to Ukraine.

Ukraine’s public sector finances have also suffered, with lost tax revenues amounting to up to US$48.5 billion cumulatively between 2014 and 2020. Combined with an estimated additional military spend of up to US$14.9 billion between 2014 and 2020, which would not otherwise have been necessary. Cebr finds that Ukraine would have had up to US$63.3 billion more to spend on non-military activities over that period had the conflict not occurred.

Losses of a similar order of magnitude will have been continuing to accrue since 2020, and most likely have increased over the recent period of escalation of the conflict.

Cebr’s report includes an assessment of previous research on the subject and how those compare with its own analysis. Cebr’s numbers are greater because they cover a longer period, because they include the impacts of both the events in Donbas and the annexation of Crimea, and because they use the internationally accepted ‘forgone output’ measure of lost GDP.

Douglas McWilliams, Deputy Chairman and Founder, Centre for Economics and Business Research, said: “Our research shows the cost to Ukraine of the conflict with Russia in the period through to 2020. Through a combination of a major loss of assets, diminished tax revenue, and a significant knock to the confidence in Ukraine’s economy, this has caused severe economic damage, directly affecting the lives of Ukrainians. Ukraine’s losses will have continued to mount since then.”

The UK-based economics think tank Cebr was commissioned by the Government of Ukraine to calculate on a fully independent basis Ukraine’s economic losses resulting from the conflict over the relevant period.

In so doing, Cebr adopted a ‘forgone output’ methodology, which is a common approach in the study of economic losses in the context of military action. The research is focused on comparing the actual path of GDP with a counterfactual situation, in which the conflict did not occur, based on Cebr’s own forecasts for the Ukrainian economy from 2013, produced prior to the military action, from Cebr’s World Economic League Table 2014. The forecasts for 2020 have been adjusted to take account of the Covid-19 pandemic.

Breakdown of costs

Cebr estimates the following economic costs stemming from the conflict. All figures are presented in annual terms between 2014 and 2020, unless otherwise stated:  

  • Up to $40.0 billion of forgone GDP. This is equivalent to 19.9% of annual pre-crisis GDP.
  • Lost output in Crimea and Sevastopol of up to $8.3 billion
  • Lost output of up to $14.6 billion in Donbas
  • Lost export value of up to $20.3 billion
  • Lost investment value of up to $10.3 billion
  • Lost capital assets of up to $42.4 billion in Crimea and Sevastopol between 2014 to 2020
  • Lost capital assets of up to $74.8 billion in Donbas between 2014 to 2020
  • Lost tax revenues of up to $48.5 billion cumulatively between 2014 and 2020
  • Additional military expenditure of up to $14.9 billion cumulatively between 2014 and 2020
  • A net worsening of public finances of up to $63.3 billion cumulatively between 2014 and 2020

Cebr’s World Economic League Table is a renowned set of economic forecasts, which has been widely quoted around the world, including in Russian state media outlets.

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