Russia’s war may cost Ukraine $255 billion in human capital in next decade

Dmytro Lyvch, the head of the NGO EasyBusiness and leader of the analytical division at the Center for Economic Recovery, pointed out that Ukraine could face losses of $255 billion due to the war over the next decade.

These findings come from the study titled "Human Capital of Ukraine: Current Status, Challenges, and Potential Solutions," Rubryka reports from the Human Capital UA forum.

What is the problem?

The full-scale war has led to the displacement of millions of Ukrainian citizens and the separation of families. Over 6 million Ukrainians have sought refuge abroad, with an additional 5 million becoming internally displaced. The security and defense sector involves more than a million people, and the number of veterans is steadily increasing. In light of these factors, human capital development in Ukraine appears as a significant challenge.

What is the solution?

The study was conducted by the team of the Center for Economic Recovery and presented on October 25 during the national discussion, Human Capital UA.

The forum discusses the economy, security, social policy, quality of life, education, and the future, gathering heads of ministries, public organizations, diplomats, and businesses around the event. The goal is to develop a unified state strategy to develop human capital involving all participants.

How does it work?

The research "Human Capital of Ukraine" provides specific data to transition from vision to specific projects.

The concept of "human capital" is used in 9 strategic documents, but there is no common definition even at the Ukrainian government level, said Dmytro Lyvch. Researchers propose to define it as a combination of people and their development thanks to education, health care, and social components (living conditions) with the importance of the economy.

Lyvch said there was a direct relationship between the country's level of human capital development and its economic development. Ukraine is included in the list of countries with a sufficiently high level of human development, but we have not yet been able to convert it into a high level of economic capacity.

Another point that the study revealed is that the lack of data is a major problem in developing evidence-based policy in Ukraine.

In the next ten years, Ukraine may lose up to $255 billion due to the negative impact of the war on human capital. For example, restoring the education sector requires 8% of Ukraine's GDP.

To respond to many challenges provoked by the war, Ukraine must effectively use the international community's support. This is the support the country receives on the way to the EU membership, the funding provided by various global organizations, and the initiatives they help implement. And these are also security guarantees that can become one of the main factors in the return of military migrants to Ukraine.

Dmytro Lyvch concluded that achieving the goals of human capital development was impossible without coordination at the level of state policy, which is currently being developed by several ministries.

The Human Capital UA forum was organized by the Center for Economic Recovery, EasyBusiness, and the United Nations Development Program in Ukraine (UNDP).

As Rubryka previously reported, researchers determined the human capital index for the recovery of Ukraine. In 2023, it is 6.4 on a ten-point scale. The index consists of health capital (this year is 6.0), adaptability capital (6.5), and social capital (6.6). Also, experts identified the drivers of each capital, the governmental work, and the donors with which all these components can be strengthened.