In the war of aggression against Ukraine, Russia has to calculate high economic costs.

On the other hand, the Ukrainian economy has proven to be surprisingly stable after a month of war activity.

This is the finding of the Vienna Institute for International Economic Comparisons (WIIW), which specializes in Eastern Europe.

For the time being, the country has sufficient foreign exchange reserves, it is said.

The banking system is described as stable and liquid.

The regions directly affected by the war generate a good half of Ukraine's economic output, says economist Olga Pindyuk.

Nevertheless, the medium-term outlook is bleak.

Michael Seiser

Business correspondent for Austria and Hungary based in Vienna.

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How difficult it is to assess the damage is shown by the different assessments of international damage estimates, which after three weeks of war amount to $63 billion, and the Ukrainian estimate of $565 billion.

However, the costs of reconstruction will be significantly higher than the damage currently recorded, the WIIW predicts.

"However, the Ukrainian economy will falter massively the more the foreign exchange earnings from exports, which are so important, collapse," analyzes Pindyuk.

International financial aid will cushion this somewhat.

Should the Ukraine be divided at the end of the war, the WIIW expects a strong upswing and modernization in the part that will remain independent after the end of the war.

Russian GDP could fall by 7 to 15 percent

The opposite is true in Russia, where gross domestic product (GDP) will shrink by 7 to 15 percent this year alone.

Inflation could rise to 30 percent.

For the time being without an energy embargo, warfare will not fail because of money, but rather because of a lack of soldiers and weapons.

But sanctions would prevent war financing in the medium term, and overall the medium-term prospects for Russia were negative.

The Russian central bank was able to stabilize the economy with strict capital transactions and foreign exchange controls, regulatory easing for banks and doubling interest rates to 20 percent and "prevented a financial meltdown".

However, Vasily Astrov knows that investor confidence has been undermined.

In the medium term, the economic prospects for Russia are largely negative overall, the economists judge.

"Even if sanctions are eventually eased, February 2022 will likely go down in history as the turning point in which Russia's integration into the European economy failed for a prolonged period," writes Richard Grieveson, deputy director of the WIIW.

However, gloating should not arise in the rest of Europe, because war and sanctions are also driving inflation “to ever higher heights” in the rest of Europe.

That will dampen real income and growth prospects.