Ukrainian refugees support the European economy: what are the implications for Ukraine
Millions of Ukrainians have been forced to move to European countries since the start of the full-scale invasion. Find out more about how refugees have helped the EU economy and what it costs Ukraine
The wave of migration caused by russia's full-scale invasion has become the largest since World War II. The increase in the number of vulnerable citizens in EU countries has put an additional burden on the economy, which had already weakened due to the impact of the COVID-19 pandemic.
According to the IMF, the European Union has spent up to €37 billion to support refugees from Ukraine. Although this figure is extremely high, it is about 0.2% of the EU's GDP.
At the same time, it cannot be said that Ukrainians have weakened the economy. According to the National Bank of Ukraine, Ukrainians spend up to $2 billion a month abroad.
Refugees from Ukraine as additional support for the European economy
Ukrainians who have found refuge in the EU support the country due to the following factors:
1. Spending on purchases. Russian aggression has caused inflation, which has worsened the purchasing power of EU citizens. Under such conditions, the contribution of Ukrainians has become tangible;
2. Legal employment and payment of taxes. The right to work for Ukrainians has been legalized through the status of temporary protection. Consequently, refugees have become full-fledged players in the labor market, paying taxes under general conditions;
3. The use of bank cards and transactions with ATMs. In March 2022 alone, about $10 billion was withdrawn abroad;
4. Renting a house. A quarter of refugees can pay rent. This factor both strengthens the economy and drives up real estate prices.
In which countries is the contribution of Ukrainians the largest?
Poland and Germany have become leaders among countries in terms of the number of non-cash payments. In Poland, this figure is 28% of the total, and in Germany - 10%.
Surge in the labor market
Ukrainians have become a source of labor in the EU, actively integrating into the labor market. It would not be surprising to say that Ukrainians in Poland are the most active - according to international estimates, half of refugees are officially employed.
The Center for Migration Studies at the University of Warsaw reported that employed refugees paid about $2.4 billion (10 billion zlotys) in taxes. This amount alone is more than the financial assistance provided to Ukraine (excluding the cost of educational and medical services).
The contribution of migrants is also felt in other countries. The Organization for Economic Cooperation and Development (OECD) notes that refugees contribute to annual GDP growth by:
- 1.2% in Poland, the Czech Republic and Estonia;
- 0.8% in Hungary, Latvia, Slovakia, Lithuania and Romania.
Oxford Economics experts made different forecasts, primarily for Poland. If 650,000 migrants remain in the country after the war, GDP will increase by 1.2%, if 1 million, the additional growth will be 2%.
Negative trends affect Ukrainians themselves. Although 66% of refugees have higher education, most work in industries with lower wages.
By the way, the financial situation of refugees in Europe has become worse compared to life in Ukraine before the war. Previously, 12% had an income that was only enough for food, and now this figure has risen to 42%.
What is the outlook for Ukraine?
People are the most important value and resource for every country. And the war has once again confirmed this. Therefore, every refugee who does not return to Ukraine will contribute to the deterioration of the already difficult economic and demographic situation.
The Ministry of Economy expects that about three-quarters of temporary migrants will return home in the first years after the end of hostilities. The biggest concerns relate to students who have easily entered European universities and educated women who have found jobs and adapted to life abroad.
According to Oleksiy Sobolev, Deputy Minister of Economy, 100,000 people who do not return to Ukraine will reduce GDP by 0.5%. The demographic situation will also be affected, as in 2023 there will be 0.8 children per woman. If some women do not return after the war, the situation will be even worse.
The Ukrainian authorities are currently working on mechanisms to encourage refugees to return home after the war.
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