Ukrainian refugees: how will the economy recover with a diminished population?

Ukrainian refugees: how will the economy recover with a diminished population?

The ongoing war in Ukraine has led to millions of refugees considering settling permanently in the countries they have sought refuge in across Europe. This poses a significant challenge to the country’s efforts to rebuild its economy once the conflict ends. Natalka Korzh, a TV director and mother-of-two, left behind her dream house in Kyiv when she fled the rockets at the start of the war. Now living in Portugal, she has no plans to return to Ukraine even when the fighting stops. Korzh intends to open a charity in Portugal to assist other migrants in her new home.

According to studies conducted by the United Nations refugee agency UNHCR, the majority of displaced Ukrainians express a desire to return home eventually, but only a small percentage plan to do so in the near future. Similar studies have shown that in previous refugee crises, such as the one in Syria, the desire to return home diminishes over time. This raises concerns among officials and business leaders who fear that many refugees will not return, leading to a continued decline in the workforce for years to come.

The shortage of qualified workers is already being felt in various industries, including pharmaceuticals. Volodymyr Kostiuk, CEO of Farmak, one of Ukraine’s top pharmaceutical companies, is facing a shortage of qualified laboratory workers and production specialists due to the large number of people abroad, displaced within Ukraine, or serving in the armed forces. Kostiuk emphasizes the need to encourage the return of these workers to Ukraine, as the longer they stay abroad, the less likely they are to come back.

A poll conducted by the Ukrainian think-tank, the Institute for Economic Research and Political Studies, revealed that a third of businesses in Ukraine see staff shortages as a significant challenge. The majority of refugees are women and children, as conscription-aged men are restricted from leaving the country. This has resulted in labor shortages, particularly in industries that require higher levels of education and training, as educated young women are among those most likely to have left the country since the war began.

The shrinking workforce not only affects labor availability but also impacts consumer demand in the long term. Fozzy Group, which operates leading supermarket chains, has reopened stores in areas around Kyiv following Russia’s retreat from the region. However, footfall remains low, as many people are still displaced or living abroad. This lack of consumer activity hinders economic recovery.

In addition to the refugee crisis, Ukraine is also facing a population problem due to the high proportion of elderly citizens and a declining fertility rate. The war has resulted in casualties among working-age men, with leaked U.S. intelligence assessments suggesting that 15,000 men have been killed or wounded. Demographer Ella Libanova warns that once wartime restrictions on men leaving the country are lifted, many may join their families abroad, leading to a loss of young, qualified, and educated individuals.

The population decline in Ukraine is further exacerbated by Russia’s occupation of a significant portion of the country’s territory. Estimates suggest that the population in areas controlled by Kyiv could already be as low as 28 million, down from the government’s pre-invasion estimate of 41 million. Even before the war, Ukraine’s population was shrinking, and projections indicate that it could decline by up to a third over the next 30 years.

The economic impact of the population decline and the loss of skilled workers is a major concern. The Center for Economic Strategy estimates that between 860,000 and 2.7 million Ukrainians may permanently remain abroad, resulting in a potential loss of 2.55%-7.71% of the country’s GDP per year. While some businesses have managed to adapt by allowing remote work, there is a growing shortage of specialized workers. The government remains optimistic about the return of refugees, citing increased patriotism after the invasion. However, the uncertainty surrounding the future population and workforce poses significant challenges to Ukraine’s economic recovery.

Despite the challenges, some Ukrainians abroad are still contributing to the country’s economy remotely. Fashion designer Ksenia Karpenko, for example, manages a team in Ukraine from her current home in Spain. She believes she is more effective in her current location and continues to design and produce clothes for boutiques in Madrid and Barcelona.

In conclusion, the war in Ukraine has led to a significant refugee crisis and a shrinking population. The potential loss of skilled workers and the challenges faced by businesses and the economy are major concerns. The government hopes for the return of refugees, but the uncertainty surrounding the situation poses significant obstacles to rebuilding and recovering the economy.

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