EU Commission includes Ukraine into its economic forecasts for the first time

18 May, 01:52 PM
Flags of the European Union (Photo:REUTERS/Yves Herman)

Flags of the European Union (Photo:REUTERS/Yves Herman)

The European Commission has included Ukraine’s economy in its economic forecasts for the first time, according to the European Economic Forecast, Spring 2023, released on May 17.

Along with Ukraine, the European Commission has also assessed the economies of Moldova and Bosnia and Herzegovina, which were also granted candidate status for EU membership.

According to the EU Commission’s assessment, Ukraine “has demonstrated remarkable resilience during the war, and efforts towards joining the EU, having been granted candidate country status on June 23, 2022, should improve prospects for Ukraine.”

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“Population displacement, subdued business activity and severe output contraction in the regions with active combat have resulted in high inflation and soaring unemployment,” the report says.

“In 2022, private consumption and investment are estimated to have dropped by about 30% and 35% respectively, resulting in an overall GDP contraction of 29.1%.”

At the same time, according to the forecast, the massive exodus of more than 7 million people has recently partly reversed, but about 4 million people are still abroad. More than 2 million internally displaced persons have also returned to their places of origin.

The European Commission stressed that Ukraine’s economy has proven resilient despite the war. However, Russian attacks on the power grid in late 2022 and early 2023 have destroyed or seriously damaged half of Ukraine’s power infrastructure. Yet, the EU says, stronger-than expected resilience in the power grid, solidarity initiatives in support of exports, and financial assistance from partner nations are all expected to contribute to a broad stabilization of economic output in 2023.

The European Commission also expects that after a drop of almost 30% in 2022, the Ukrainian economy may rebound moderately, namely by 0.6% in 2023, and even by 4% in 2024, but under the assumption that the conditions are in place for a gradual increase in early reconstruction efforts from mid-2024.

Brussels reiterated that formidable efforts will be needed to attract investment and launch a full-scale reconstruction, the cost of which has been recently estimated at $411 billion by the World Bank’s Rapid Damage and Needs Assessment II.

“An ambitious reform program will also be needed to align the country with its European path,” the report says.

“Reducing the much-increased role of the state in the economy, solving the endemic issue of corruption, improving the efficiency of the judiciary and strengthening the enforceability of property rights are among the main challenges and can, if successfully pursued, enable the modernization of the economy.”

The European Commission should release the first assessment of Ukraine’s progress in the reforms needed to start negotiations on EU membership in June 2023.

At that time, Brussels should assess what has changed in the year since Ukraine was granted candidate status, as well as updating their list of recommendations for reforms that Ukraine should focus on.

In the autumn, the European Union is to report on its own enlargement policy, taking into account the possibility of Ukraine’s membership.

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