By Libby George
VIENNA (Reuters) – Eastern European nations confronting a plethora of economic threats fuelled by war on their doorstep may face fresh pressure if peace is reached in Ukraine – from tight labour markets that fuel inflation thanks to an exodus of Ukrainian workers.
Central and eastern European countries are home to a large proportion of more than 4.3 million Ukrainians who fled to the EU in the wake of Russia’s invasion and have filled jobs amid historically low unemployment levels.
Their possible return to Ukraine after a peace deal is reached would be a snag in what is otherwise good news for the region.
“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,” Charlotte Ruhe, managing director for Central and South Eastern Europe at the European Bank of Reconstruction and Development said at the Invisso Central and Eastern European Forum in Vienna.
Incoming U.S. President Donald Trump’s pledge to end hostilities between Russia and Ukraine when he takes office on Jan. 20 has prompted many to begin considering a post-war future. However, it is unclear how he plans to achieve this and his advisors have conceded a peace deal is months away.
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 euro zone.
DRIVING EXPANSION
Ukrainian workers – who gained legal rights to live and work in Europe via a March 2022 European Union directive – aided this dynamism, helping the region’s manufacturing and export-driven economies expand quickly.
Of the 4.3 million people who fled Ukraine for the EU by December 2023, 22% of them were in Poland and roughly 9% in the Czech Republic, Eurostat data showed.
“Part of the economic success in many countries is linked to Ukrainians who moved there over the last two years,” Christian Petter, head of Austria and CEE with J. Safra Sarasin, said at the summit.
“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.”
The region faces other, bigger, headwinds.
Growth in several countries – notably Hungary – has centred around manufacturing and exporting, including car parts, thanks