Policy Note 59: Reconstruction in Ukraine – challenges and potential for Austrian companies

Since the start of the Russian war of aggression in February 2022, Ukraine's economic output has plummeted. According to international estimates, real GDP had fallen to around 77% of its pre-war level by the end of 2024. In addition, large parts of the infrastructure, industrial facilities and residential buildings were destroyed. The current reconstruction requirement is estimated at around 524 billion US dollars.

Against this background, EcoAustria has examined in a current policy note how Austria can effectively contribute to the reconstruction of Ukraine with its economic expertise. The focus is on those areas in which domestic companies have particular strengths and can therefore make a substantial contribution to reconstruction. At the same time, the analysis highlights the economic prospects that will open up for Austrian companies in the course of a long-term stable reconstruction process.

The results show that Austria has distinct specialization advantages in many of the sectors that will be particularly in demand in the Ukrainian reconstruction. These include above all freelance, scientific and technical services, the construction industry, mechanical and plant engineering, the manufacture of electrical equipment as well as IT and information services. Metal production and paper and wood processing are also among the internationally competitive Austrian sectors. "These sectors not only account for a high proportion of domestic value-added exports, but are also characterized by their particular relevance for the reconstruction of infrastructure, the industrial base and administrative systems. The combination of technical excellence, export-oriented focus and project expertise makes them key players for substantial Austrian participation in the reconstruction of Ukraine," emphasizes Wolfgang Schwarzbauer, Head of Regional Economic Policy and Foreign Trade Research at EcoAustria.

Ukraine's medium-term economic development will depend crucially on whether it succeeds in expanding key future areas such as green energy, sustainable industrial production and digitalization in a targeted manner. There are a number of cooperation opportunities for Austrian companies here - for example in the development of infrastructure for renewable energies, the development of a green hydrogen economy or the digitalization of state administrative processes.

At the same time, reconstruction remains fraught with considerable risks: uncertainties in the geopolitical environment, weaknesses in the rule of law and the fight against corruption as well as the loss of qualified workers pose major challenges. "Sustainable development therefore requires a stable political framework, effective reforms in the judicial and administrative sectors as well as targeted measures for the requalification and return of qualified workers. Only with reliable structures can Ukraine's economic potential be raised in the long term," emphasizes Schwarzbauer.

In order for Austrian companies to fully exploit their potential in the Ukrainian reconstruction process, targeted political and economic framework conditions are required. Among other things, EcoAustria recommends expanding coordinated contact points such as the "Point of Contact Ukraine Reconstruction" so that it can be activated quickly and effectively in the event of a cessation of hostilities. It already makes sense to maintain this interface as a platform for networking and information exchange, even if comprehensive operational use is not yet a priority. Through close cooperation between the Austrian Embassy in Kiev, the Foreign Trade Center of the Austrian Federal Economic Chamber, the ministries involved and regional players, this coordination point can help to visibly and efficiently bundle the commitment of Austrian companies in the future. Visible initiatives - such as visits by high-ranking political representatives or bilateral projects at provincial and municipal level - strengthen Austria's image as a reliable local partner. At the same time, structural measures such as the expansion of export liability and hedging instruments, a clear sector focus in areas such as mechanical engineering, green energy and technical services as well as contributions to strengthening the rule of law and administration are crucial to sustainably improving the investment environment in Ukraine. "A strategically coordinated approach creates trust, facilitates entrepreneurial commitment and increases the effectiveness of Austrian contributions in the long term," says Schwarzbauer.

Austria's successful contribution to the reconstruction of Ukraine therefore requires a combination of entrepreneurial expertise, political support and international cooperation. In order to make effective use of economic opportunities and at the same time make a real contribution to the stabilization and modernization of Ukraine, the commitment must be coordinated and supported at several levels. "Reconstruction is not a short-term project, but a long-term process with high geopolitical, economic and social significance - also for Austria. The earlier we set the strategic and structural course, the greater the chance that domestic companies will play an active role and at the same time contribute to sustainable development in Ukraine," Schwarzbauer concluded.