The National Bank of Ukraine (NBU) has published a staff discussion on how Ukrainian migrants, forced to flee their homes because of Russia’s all-out war against Ukraine, are affecting the EU economy. NV Business cites eight notable numbers from this analysis.
About 4.5 million Ukrainians live in European countries
According to UNHCR, as of November 15, 2022, about 7.6 million Ukrainian citizens remained abroad because of the war.
“An increase in the labor force and foreign spending by Ukrainian migrants are positive for host country economies, although a large wave of migration brought with it a number of challenges, including for public finances,” the NBU said.
Three million Ukrainian citizens ended up in Russia and Belarus, partly due to their forced deportation to Belarus.
Ukrainians spend up to $2 billion a month abroad
The net fiscal effect for Europe will be positive in the long term as Ukrainians actively integrate into the European labor market and pay taxes.
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“Expenditures by Ukrainian migrants support recipient countries’ economies mainly in the form of private consumption (thereby partially offsetting the negative impact of the war in Ukraine on real private consumption in the EU),” the NBU said.
“In particular, spending by Ukrainians abroad more than tripled in 2022 compared to the previous year, reaching $2 billion per month.”
Also, spending on Ukrainian migrants stimulates public consumption, especially in the areas of housing, health care and educational infrastructure (taking into account the high proportion of children, ranging from 28% to 44% in different countries).
1.5 million Ukrainians live in Poland
In November, Ukrainians were granted the largest temporary protection status by Poland, with almost 1.5 million, more than a million by Germany and about 450,000 by the Czech Republic. More than 100,000 Ukrainians are also registered in Italy, Spain, Bulgaria, the UK and France.
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The REACH survey carried out at the Polish border showed that the main factors for choosing the country of destination were: family or friends in the country of destination (39%), proximity to Ukraine (31%) and advice in reception centers (17%). However, macroeconomic and labor market conditions are likely to play a more important role in migrant country choices over time.
According to the UNHCR survey, 87% of migrants are women with children and 65% of working-age women aged 18-59. About 70% of the respondents have a higher education.
“The average monthly cash withdrawal volume fell noticeably from $990,000 in March-June to $580,000 in July-October,” the report said.
“This was facilitated both by migrants applying for and receiving social benefits in recipient countries, and by the NBU introducing restrictions on foreign currency cash withdrawals abroad, which also helped stop so-called card tourism. As expected, migrants have withdrawn the largest amounts of cash in Poland. However, it should be noted that prior to the introduction of foreign exchange restrictions, cash withdrawals were also important in other countries bordering Ukraine – notably Slovakia and Romania.”
Every month Ukrainians spend hundreds of millions of dollars in retail chains abroad
With the introduction of cash withdrawal restrictions, the total volume of transactions with cards abroad decreased. On the other hand, the volume of business in the retail chains has not experienced a significant decline. Its volume fell from a peak of $770 million in May to $560 million in October.
The largest transactions in retail chains using Ukrainian cards were recorded in Poland (28% of the total volume) and Germany (10%). Other sources of spending by Ukrainians abroad are cash exports from Ukraine, government support programs and earned income in host countries. With the growth of Ukrainians’ employment abroad, labor incomes earned in receiving countries are beginning to determine the lion’s share of financing migrants’ expenses.
Migrants from Ukraine increase Poland’s GDP by more than 1 percentage point every year
Strzelecki et al. (2022) examined the economic consequences of labor migration of Ukrainians to Poland from 2013 to 2018. The labor force growth at that time was about 0.8% per year, and the contribution of Ukrainian migrants to annual GDP growth was 0.5 percentage points.
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“Using OECD calculations of the contribution of Ukrainian migrants to the labor force of European countries and estimates by Strzelecki et al. (2022) of their impact on GDP growth in Poland, an assumption was made regarding the impact of migration from Ukraine on the economies of other countries by extrapolating the impact impact based on the number of migrants,” the NBU said.
“As a result, the additional contribution to annual GDP growth in the Czech Republic, Poland and Estonia will reach about 1.2 percentage points per year, and the contribution of migrants to the GDP of Hungary, Latvia, Slovakia, Lithuania and Romania will reach almost 0.8 percentage points amount ”
The influx of Ukrainian migrants to Estonia, Poland and the Czech Republic in 2026 will increase goods production in these countries by 2.3%.
According to the calculations presented in the study, based on estimates from an IMF research study (2020) and surveys by the UN and the Razumkov Center, other things being equal, the influence of Ukrainian migrants will increase production in Estonia, Poland and the Czech Republic by 2 .2%-2.3% compared to the baseline scenario without migration and by 0.6%-0.65% in Germany.
The EU can spend up to EUR 70 billion a year on Ukrainian migrants
Bird and Amaglobeli (IMF, 2022) estimated the short-term fiscal impact of Ukrainian migrants on EU countries’ economies at around €30-37 billion (US$32-40 billion), or 0.19%-0.23% of GDP the EU. In their calculations, the researchers assumed a number of migrants of 4.1 to 5.0 million people and an average cost per migrant of 11,577 euros (12,265 US dollars) (OECD data for 2017 adjusted for inflation). Darvas (2022), on the other hand, suggests a wide range of EUR 9,000 to EUR 25,000 ($26,500) (at 2022 prices) in government spending per migrant per year. If two-thirds of Ukrainians currently registered in the EU need government assistance, total spending will range from 26.4 billion euros ($28 billion) to 73.3 billion euros ($77.5 billion) a year. However, the countries bordering Ukraine and the Baltic countries will bear the largest expenditures. According to EIB calculations (2022), Lithuania could spend 9% of GDP, Estonia more than 7% of GDP and Hungary, Poland and the Czech Republic 4% to 6% of GDP on migrant adjustment.
The EU labor force will increase by 1.3 million people at the expense of Ukraine
The integration of Ukrainian migrants will affect labor market indicators in receiving countries. Ukraine’s geographic and cultural proximity to Europe, the presence of diaspora and temporary protection status will help increase labor market participation of migrants.
“In particular, the European Central Bank expects that 25% to 55% of Ukrainian migrants of working age will participate in the eurozone labor force in the medium term,” the NBU reported.
“Nevertheless, the EU labor force will grow by 0.2% to 0.8%, or by 0.3 to 1.3 million people.”
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