The return of refugees to Ukraine after a peace deal with Russia is signed could lead to new economic challenges for Eastern European countries, mainly due to the outflow of Ukrainian workers, which could cause labour market shortages and increase inflation. 

Source:Reuters

Details:Reuters reports that countries in Central and Eastern Europe, which have welcomed over 4.3 million Ukrainians fleeing war over the past two years, could face severe economic difficulties after a peace deal is signed.  

The problem is that a significant part of the economic growth in countries such as Poland, Czechia and Hungary has been driven by the labour force from Ukraine. The loss of these workers could lead to labour shortages, directly impacting labour markets and inflationary processes. 

Charlotte Ruhe, the managing director for Central and South Eastern Europe at the European Bank of Reconstruction and Development, states that the return of many Ukrainian migrants home will worsen the demographics in these countries, which are already facing low unemployment. 

Quote from Ruhe:"Demography is a risk, and it's one that a resolution of the war in Ukraine will make worse, because some of those Ukrainians will go back home."

Details:The pledge made by US President-elect Donald Trump to stop the war between Russia and Ukraine when he takes office on 20 January has prompted many to think about their post-war futures, reports Reuters. However, it is unclear how Trump plans to carry out his promise. Instead, his advisors emphasise that a peace deal is still several months away. 

Quote:"Economic growth across central and eastern Europe was 2.2% last year, Raiffeisen Bank International estimates – faster than the stagnant 0.8% it predicts in the eurozone."

Details:Eurostat data shows that of the 4.3 million people who fled Ukraine for the EU before December of 2023, 22% were in Poland and around 9% were in Czechia. 

"Part of the economic success in many countries is linked to Ukrainians who moved there over the last two years," noted Christian Petter, head of Austria and CEE with J. Safra Sarasin.

The unemployment rate in Poland is at its lowest level on record, forcing employers to raise wages by up to 10% last year. Meanwhile, the Czech government predicts a labour shortage in the near future, which may also be the case in other countries in the region. 

"Now, with the war hopefully being finished, of course, there is a big chance that these people will return to Ukraine and [leave a gap in] labour markets like in Prague, in Bratislava, in Warsaw, and will be a challenge to be replaced," added Petter. 

In November of 2024, the central bank of Poland published the results of a survey of Ukrainian migrants. Based on the survey, only 2% of the refugees and 1% of the pre-war migrants intended to return to Ukraine within a year. On the other hand, if the war were to end, these numbers would increase to 59% and 34%, respectively. 

Background: 

• A European Commission spokesperson explained that Ukrainians under temporary protection in the EU can visit Ukraine and return to the European Union without losing their temporary residence permit. No EU country can forbid them from doing so. 
• The Council of the European Union extended temporary protection to Ukrainians until March of 2026.

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