Enlarge image
Destruction in residential buildings under fire in Kiev: Germany's GDP is also weakened by the war
Photo: Aleksandr Gusev / SOPA Images / IMAGO
Damage can increase a country's gross domestic product: after all, something breaks and has to be repaired, new work and orders are created. But when a war rages, the economic performance of the affected country is severely affected. Buildings, machines and infrastructure are extensively destroyed - and growth collapses for many years.
It is obvious that a country affected by the war particularly suffers from these consequences. A new study by the Kiel Institute for the World Economy (IfW) with data for more than 150 wars since 1870 shows that neighboring countries also have to pay a high price for the conflict - for example in the form of higher inflation and lower growth.
In order to estimate how much a country is suffering from the economic consequences, the researchers led by Jonathan Federle and Moritz Schularick have developed the online tool “Price of war”, which can be used to estimate hypothetical scenarios under certain assumptions.
Ukraine's GDP is expected to collapse by $120 billion by 2026
Based on experience from past wars, the researchers predict that Ukraine will lose around $120 billion in economic output by 2026 and at the same time the country's capital stock, such as buildings or roads, will fall by almost a trillion dollars.
According to estimates, the aggressor Russia is doing better economically; the calculator estimates that the country's GDP will be eight billion dollars lower by 2026 than without the effects of the war.
According to forecasts, third countries not involved in the war are likely to record GDP losses of around $250 billion, $70 billion of which in the EU alone. The Russian war of aggression against Ukraine will cost Germany's GDP around $15-20 billion by 2026.
»The calculations are based on the costs of “typical” interstate wars in the past. Depending on the duration and intensity of the war, less or more serious scenarios are conceivable," says IfW researcher Federle. "The transfer effects we calculate to other countries primarily take into account the trade links caused by geographical proximity and the size of the respective economy in which a war breaks out."
According to the study, the question of how much the war affects an economy economically is also determined by how strongly it is globally integrated. In the case of a possible war in Taiwan, the estimates tend to represent the lower end of the expected economic war costs. Iran, on the other hand, is not as closely involved in world trade due to sanctions and the actual costs of the consequences of war could be relatively lower.
IfW President Schularick emphasized the economic value of peace. The estimates showed "how catastrophic a war on our own soil is in every respect," he said. And: "Military strength and credible deterrence, which make external attacks unlikely, also make sense from an economic perspective."
Apr