Questions and Answers: Main findings of ‘Rapid Damage and Needs Assessment 2′

1. What are the main findings of the Rapid Damage and Needs Assessment 2

The second Rapid Damage and Needs Assessment (RDNA2) carried out by the World Bank in coordination with the EU and the Ukrainian Government covers a full year of the unprovoked and unjustified aggression by Russia against Ukraine, from 24 February 2022 until 24 February 2023. It finds that the priority needs for 2023 amount to around USD 14 billion and focus on restoration of energy, housing, critical and social infrastructure, basic services for the most vulnerable, explosive hazard management, and private sector development. It is estimated that the Ukraine's budget already covers up to USD 3 billion of USD14 billion and the funding gap of Government of Ukraine is assessed to be approximately USD 6 billion.

Looking at a 10-year perspective for the reconstruction efforts, as set out by the report, the direct damage in Ukraine has reached over USD135 billion, with housing, transport, energy, and commerce and industry identified as the most affected sectors. Damage is concentrated in the frontline oblasts, particularly Donetska, Kharkivska, Luhanska, Zaporizka, as well as those brought back under government control, such as Kyivska and Khersonska. Disruptions to economic flows and production losses amount to around USD290 billion.

Ukraine's gross domestic product (GDP) shrank by 30.4 percent in 2022, and poverty is expected to have increased from 5.5 percent to 24.2 percent in 2022. As of February 24, 2023, for the next decade, reconstruction and recovery needs are estimated at about USD411 billion. These needs include critical steps toward becoming a modern, low-carbon, disaster- and climate-resilient country that is aligned with European Union policies and standards, and where the country's vulnerabilities are addressed.

The full report of the RDNA2 will be officially published on the 4th of April 2023.

2. What are the priority needs for 2023 of the RDNA2?

The priority needs for 2023 take into account strategic priorities set out by the Ukrainian government as well as existing financing and implementation capacity of Ukraine. The five key recovery and reconstruction priorities are:

1. Critical and social infrastructure (USD 5.7 billion), and basic service delivery to vulnerable populations. This will include renewal of housing utilities, repair and reconstruction of transport infrastructure and repair and reconstruction of schools, health facilities, and other social and administrative infrastructure.

2. Energy infrastructure (USD3.3 billion ), including restoration and repair of transmission and distribution lines and generation capacity, development of renewables and protecting the power grid.

3. Housing (USD1.9 billion),  including quick repairs and capital reconstruction.

4. Private sector development (USD 2.7 billion), including grants, credit lines, and risk facilities to support small and medium enterprises (SMEs), microenterprises, the agriculture sector and exports.

5. Humanitarian demining (USD 0.4 billion)- focusing on building the strategic and operational capacity for demining operations.

3. What is the EU doing to address the priority needs in Ukraine?

In 2022, EU provided substantial support to Ukraine's short-term recovery.

This included EUR 7.2 billion MFA and more than EUR 660 million budget support. EUR 330 million of our emergency support package in grants also largely focused on emergency support for damaged infrastructure needs EU has allocated for instance EUR 100 million for the construction of new social housing for IDPs in Western Ukraine as well as EUR 50 million support to liberated cities for emergency repairs and reconstruction of social and municipal buildings in Kyiv region. In addition, EUR 100 million have also been mobilised to rehabilitate schools damaged by Russia's brutal attacks against Ukraine's education system.

EU has also reoriented projects funded with IFIs, including NEF and IFC, to support refurbishment of municipal buildings and provide medium - to long-term housing for IDPs in Western Ukraine. In 2023, the EU's priority is to support Ukraine to ensure its immediate financial needs, the rehabilitation of critical infrastructure and initial support towards sustainable post-war reconstruction, through the EUR 18 billion MFA+ package. First two instalments in the value of EUR 4.5 billion have already been made and EUR 1.5 billion monthly payments will follow until the end of the year.

In addition, in 2023 as part of the announcement of President von der Leyen and Commissioner Varhelyi during the College to Government meeting and the EU-Ukraine Summit in Kyiv in February 2023, EUR 1 billion will be mobilised from the NDICI grants and EIB loans for Ukraine's fast recovery. It will contribute to the priority needs including for example in the area of energy, as well as critical and social infrastructure. The updated RDNA will inform the ongoing discussions with Ukraine on what priority sectors this funding will support.

4. What assistance has the EU already been providing to Ukraine, since the beginning of the war, to support recovery and reconstruction?

In response to Russia's war of aggression, the EU's economic, humanitarian and military support pledged to Ukraine and the EU Member States supporting Ukraine is around EUR67 billion.

It is composed of EUR50 billion that have been made available by the EU, Member States and the European Financial Institutions as well as EUR17 billion that have been made available from the EU budget for Members States, which are hosting around 4 million people under temporary protection. The EUR50 million package includes among other EUR18 billion macro-financial support package for 2023 (MFA+), accompanied by reforms, to keep the Ukrainian state afloat; EUR12 billion of military support (EUR3.6 billion via the European Peace Facility and EU Member States bilateral contributions) and an additional EUR17 billion have been made available to help cater for the needs of Ukrainians forced to flee the war in Member States. Regarding energy, the EU is providing vital support to Ukraine's energy sector damaged by Russia's continuous strikes on civilian infrastructure.

This includes an additional 2.400 generators on top of 3.000 already delivered; EUR 157,5 million from the Energy Support Fund, as well as a total of 35 million LED light bulbs already contracted (15 million delivered) to help Ukraine significantly reduce energy consumption). Upon the invitation of the EU, Ukraine will take part in the Joint gas purchasing platform of the EU set up in April 2022 to secure gas supplies for the coming winter. In addition, the European and Ukrainian electricity grids have been synchronized in March 2022, allowing for electricity trade.

The EU is committed to increase electricity exports to Ukraine to two GW (from 700 MW all hours currently). EU also supports building back better in line with EU standards and core principles, in order to facilitate progressive integration of Ukraine into the EU single market.

5. What are the overall principles to guide the recovery and reconstruction process in Ukraine?

The key principles to guide the recovery and reconstruction process in Ukraine as set out by both RDNAs are:  

• Balancing urgent needs and medium- to long-term goals - strategic prioritization of reconstruction across all sectors and locally driven reconstruction efforts

• Differentiated approaches that prioritize impact and needs and that promote decentralization. Investments should reflect the specific needs of communities, oblasts, regions, and stakeholders.

• Resilience and building back better for a more sustainable future. Investments should be made to avoid stranded assets and to reduce depletion of natural resources, cut emissions and waste, and protect people and the environment.

  They should go hand in hand with reforms that will allow Ukraine to support harmonization of its legislation and policies with EU law and to meet European Union standards and the acquis communautaire. 

• Durable solutions for return of refugees and integration of displaced people, prioritizing their needs for housing, access to basic services, social protection, and livelihoods. These could include housing, access to basic services, social protection, mental health and psychosocial support, livelihoods and business financing and facilitation of return and integration of refugees and IDPs.

• Continuous data collection as it's important to receive feedback and data on damage, loss and impacts of the war as well on ongoing, completed and planned repairs and reconstruction efforts to help identify needs for future years.

These main principles build on and complement the existing principles, outlined in many documents, including the July 2022 Lugano Declaration for the Reconstruction of Ukraine and the Government's Recovery Plan. The first document includes the principle of partnership, reform focus, transparency, accountability, and rule of law; democratic participation; multi-stakeholder engagement; gender equality and inclusion; and sustainability. The latter reflect the need to start now and ramp up gradually; grow prosperity in an equitable way; integrate into the EU and be consistent with and supportive of the accession path; build back better for the future; and enable private investment and entrepreneurship.

6. Is it possible to start reconstruction while the war is ongoing?

The reconstruction process of Ukraine needs to commence now, to help restarting the country's economy and help the people of Ukraine.

It will build on the five priority areas: critical and social infrastructure, energy infrastructure, housing, support to private sector and humanitarian demining. The EU and other key Ukraine's international partners are already helping to both keep the country running and support Ukrainian economy, while preparing for rebuilding the country. To address Ukraine's most urgent needs, the EU is providing regular and predictable financing under the new macro-financial assistance plus (MFA+) programme.

The EU is also providing emergency and humanitarian support, focusing its economic assistance on rapid rehabilitation and recovery. The main focus is on housing solutions and measures for integration of Internally Displaced Persons, support to the host communities, rehabilitation of some critical infrastructure, including energy, social infrastructure (schools, kindergartens, and hospitals), cybersecurity and media. This fast recovery measures are already being implemented, including in liberated areas.

The EU is working with partners such as the G7, international financial institutions and in close coordination with Ukraine itself. The Multi-agency Donor Coordination Platform for Ukraine launched on 26 January coordinates the support for Ukraine's immediate financing needs and future economic recovery and reconstruction. Its Steering Committee is co-chaired by the European Commission, the United States and Ukraine.

The Platform can help channel the effort of supporting Ukraine in addressing its immediate financing needs, including the 2023 priority needs, and those of the future economic recovery and reconstruction, as identified by the WB RDNA in collaboration with Ukraine.

7. How does Ukraine's reconstruction relate to the EU enlargement process?

Ukraine was granted the status of an EU candidate country in June 2022. This is a recognition of Ukraine's reform efforts over many years. At the same time, as a candidate country, Ukraine needs to pursue further significant reforms on its EU path.

This will likely work as an essential leverage for Ukraine to attract support and investments for its reconstruction It will also ensure that investments do not create stranded assets but are converging towards climate, environmental and digital EU policies and standards, which will help Ukraine emerge stronger and more resilient from the devastation of the Russian invasion. The reconstruction of Ukraine is to be guided and framed by the EU enlargement process. This means investments need to go hand in hand with the reforms supporting Ukraine in pursuing its European path.

They should also be implemented in line with the EU rules including rule of law reforms and fight against corruption as well as core standards and principles, based on the European Green Deal and supporting digital transformation.

Background:

Scope of the Rapid Damage and Needs Assessment  The first Rapid Damage and Needs Assessment, launched by the World Bank together with the Government of Ukraine and the European Commission was published in September 2022 The It assessed the war damage sustained between February 24, 2022 and June 1, 2022, analysing short, medium and long-term reconstruction and recovery needs of Ukraine and covered the following sectors: social, productive, infrastructure and cross cutting. It was prepared jointly by the Government of Ukraine, the World Bank, the European Commission, and the United Nations and supported by other partners including Kyiv School of Economics, civil society organizations, and the private sector. 

RDNA follows a methodology jointly developed by the European Commission, the World Bank and the United Nations based on the globally accepted UN standard Damage and Loss Assessment (DaLA) that is tailored to the war in Ukraine. The (DaLA) methodology was initially developed by the UN Economic Commission for Latin America and the Caribbean in 1972. It was used so far in many countries like Croatia, Bosnia and Herzegovina, Serbia, and Albania.

Following this methodology, RDNA 2 quantifies and validates physical damage to infrastructure, buildings as well as losses such as disrupted services and economic impacts, clearance of debris, mines and support to Internally Displaced People. It will also identify and quantify corresponding recovery and reconstruction needs: overall, by sector, and by oblast, based on the damage and losses. The goals and scope of RDNA2

RDNA 2 was prepared in a similar way and with similar goals in mind to the first RDNA but with a much longer time span as it takes stock of Ukraine's damage and losses borne over one year until 24  February 2023. It assesses the scale of damage, losses and economic and social needs for Ukraine's survival during the war and after. RDNA2 report is divided into following sectors: 1. social including housing, education, health; 2. productive including agriculture, irrigation, commerce and industry; 3.infrastructure - including energy transport, digital and 4. cross-cutting including environment, emergency response, justice and public administration.

Complementary to the standard methodology used for the first report and the estimation of short- and long-term needs, this RDNA 2 report also includes priorities for recovery and reconstruction investments for 2023. The RDNA 2 is based on the same set of concepts and their definitions as the first RDNA, namely:  Damages are defined as direct costs of destroyed or damaged physical assets and infrastructure valued in monetary terms with costs estimated based on replacing or repairing physical assets and infrastructure, considering the replacement price prevailing before the war.

Losses reflect changes in economic flows resulting from the war; valued in monetary terms, for example increased operating cost or loss of revenue for authorities/private sector. Needs correspond with value associated with the resumption of pre - war normality through activities such as repair and restoration, including a surcharge linked to building back better principles (e.g. improved energy efficiency, modernization efforts and sustainability standards), as well as factors such as global inflation and higher insurance. Needs are expressed in monetary value according to market prices prevailing as of February 24, 2023.

Needs do not equal the sum of damage and losses. Comparison of results between RDNA and RDNA 2 The RDNA2 assesses the impact between damage and losses borne over one year until 24th of February 2023.

In doing so, it builds on the foundations and analytics provided during RDNA1 which covered a slightly shorter period, namely the period between February 24 and June 1, 2022, which estimated USD 97 billion in direct damage, USD252 billion in losses, and USD 349 billion for Ukraine's recovery and reconstruction needs.