Reconstruction of Ukraine can bring Poland 190 billion zloty

The reconstruction of Ukraine after the ongoing war is over will bring Poland’s economy up to 190 billion zloty (€38.9 billion), equivalent to around 3.8% of its gross domestic product (GDP), finds a report by Polish bank Pekao S.A.

The Ukrainian government has already begun preparations for reconstruction, which will involve the cooperation of over a dozen countries working on 850 projects worth more than $750 billion. Reconstruction is to take 10 years and will be implemented in three stages.

Earlier this year. the Polish Investment and Trade Agency (PAIH) announced that over 400 Polish companies had declared an interest in helping Ukraine rebuild after the war.

“Ukraine’s reconstruction will rely heavily on integrating its economy with the EU, in terms of both infrastructure and regulation,” notes Pekao. “Poland has been going through a similar process for two decades and we have gained a lot of experience in…modernising infrastructure, harmonising laws, integrating into EU supply chains.”

“Polish public institutions and companies can share this experience and implementation potential with Ukraine, especially since we are its close neighbour,” adds the bank. “For this to happen, Poland would have to step into a new role – from being a recipient of international aid to becoming a sponsor.”

Its analysts estimate that Poland will gain 32.5 billion zloty (€6.69 billion) in direct benefits, meaning those stemming from the country’s immediate reconstruction as soon as hostilities end.

This would then be supplemented by around 140-156 billion zloty in indirect benefits spread over time and stemming from the process of Ukraine’s convergence and integration with the European Union

“A very important determinant of the benefits developed by Poland and Polish companies will be the geographical and cultural proximity, as well as the strength of existing and newly created trade links between Poland and Ukraine,” said Pekao.

Poland already ranks among the top ten biggest foreign investors in Ukraine. It also has a large Ukrainian community of around three million, made up of both prewar immigrants and refugees who have arrived this year.

The analysts note, however, that Ukraine’s reconstruction will be an expensive and difficult process, adding that “with each day of active war, these losses are increasing”.

The direct material losses caused by the war, mainly in the form of destroyed infrastructure, amount to $115 billion, according to the Kyiv School of Economics. Indirect losses in the form of lost economic potential are also significant. According to the International Labour Organization, Ukraine has lost at least five million jobs so far.

Pekao’s report notes that the costs of rebuilding can be financed by the frozen funds of the Kremlin and Russian oligarchs as well as support from Kyiv’s allies.

This support would be worth the effort for Poland “as well as the broader West” as it “will deter Russian expansionism” and stabilise the situation in the important grain, vegetable oils and commodities market, notes the bank.

Main photo credit: Scott Blake / Unsplash 

Alicja Ptak

Alicja Ptak is senior editor at Notes from Poland and a multimedia journalist. She previously worked for Reuters.