No reason to hope for quick and massive reconstruction

If you listen closely to what the main source of money for Ukraine has to say, it is difficult to see much positive. I mean the International Monetary Fund and its recent forecast for Ukraine's economic growth over the next five years.

According to the IMF’s forecast, which has been agreed with the Ukrainian government and the National Bank of Ukraine, an ‘incredible recovery; over the next five years will allow our country to reach 83 percent of the 2021 GDP. This is not a happy prospect – this yeat It's 70 percent.

If we look deeper, the basis for this growth will be provided by consumer spending, which will reach 93 percent of the 2021 level by 2027. However, reconstruction programmes have to be funded through government spending or investment.

And Ukraine’s government spending is forecast to continue to decline over the next five years, pulling GDP down. Investments will slightly support economic growth in 2024 and 2025, but will begin to slow down afterwards.

Is such GDP growth possible with programmes worth tens or even hundreds of billions of dollars for the reconstruction of housing, infrastructure, and production capabilities?

A four percent GDP growth after a 30 percent decline is not a quick recovery. GDP is an indicator of a year’s economic activity. And it is worth remembering that the war destroyed not only ‘normal activity’ but also the capital available – housing, warehouses, bridges, even agricultural land and forests. And rebuilding all this requires a lot of ‘activity’.

That is why post-war economies can grow very quickly – because they need to rebuild what they already had and knew how to do before.

All in all, there is no zrada [a Ukrainian word for 'betrayal']. And it is good that a new memorandum with the IMF has come into force, requiring Ukraine to implement reforms.

But there is no reason to hope for a quick and massive ‘reconstruction’. That is, those reasons must be made.