The outflow of millions of Ukrainians is having a profound negative impact on the country’s economy and demographics, especially combined with the wide-scale destruction caused by Russia’s war. Ukraine has lost around one-third of its consumers because of internal and external displacement. Levels of investment have also fallen significantly. The non-return of refugees may exacerbate this situation and hamper Ukraine’s reconstruction. In the most pessimistic scenario, according to Ukraine’s Ministry of Social Policy, up to 3.3 million Ukrainians may remain abroad. Projected annual economic losses could be equivalent to up to 7.8 per cent of Ukraine’s pre-2022 GDP, according to CES calculations.
The year before the full-scale invasion, foreign direct investment (FDI) into Ukraine stood at $7.95 billion (4 per cent of GDP) in 2021; in 2022, FDI had fallen to just $220 million (0.1 per cent of GDP that year). However, remittances from abroad – an even more important source of revenue for Ukraine’s budget – remained largely unchanged, both in absolute value and as a percentage of GDP. Remittances from Ukrainians abroad accounted for 9 per cent of Ukraine’s GDP in 2021; this share rose to 10.4 per cent in 2022 and decreased slightly to 8.4 per cent in 2023. Given that FDI into Ukraine is limited due to war-related risks, Ukrainians abroad are providing an important lifeline for the economy by sending money back home. The government could do more to engage Ukrainians abroad more efficiently, with the goal of maximizing remittances and channelling these into Ukraine’s reconstruction needs – for example, by issuing so-called ‘diaspora bonds’.
Ukraine also needs people to help with rebuilding. The Ministry of Economics estimates that 4.5 million workers will be necessary for the reconstruction effort. The country already struggles to fill all available vacancies. Structural changes to Ukraine’s economy due to the invasion have led to changes in the labour market and have created imbalances. For example, the types of job available do not match people’s skills, and a lack of qualified workers in some sectors coexists with unemployment in others. Some experts believe that Ukraine will need to attract foreign workers to help fill skills gaps. The government’s new demographic strategy states that:
The country also faces major demographic challenges due to the war and displacement. Ukraine currently has the highest mortality and lowest birth rates in the world. Given that the main groups to have left Ukraine are women aged 20 to 49 and their children, this poses a significant risk of population decline affecting the country’s future. President Zelenskyy has told the media that there would be no possibility of paying pensions to an ageing population in the future if millions of Ukrainians who are currently abroad do not return. If current trends continue, the number of people living in Ukraine is expected to decrease from 43 million in 2021 to 25.2 million in 2051, according to projections by the Institute of Demographics and Quality of Life at Ukraine’s Academy of Sciences, quoted in Ukraine’s demographic strategy. This dire demographic forecast is also one of the reasons why Ukraine is resisting calls by some of its partners to lower the army mobilization age for its men, which is currently set at 25 years old. As mentioned, there are fears that doing so would add to already substantial demographic pressures by contributing to casualties in the young.
CES calculations indicate that the numbers of women of child-bearing age and children left in Ukraine have decreased the most. Approximately 18 per cent of Ukrainian children aged 0–9 are now living abroad. The 10 to 19 age group has also decreased considerably: 17.3 per cent of girls and 22.8 per cent of boys of that age are now living abroad. Among adults, the numbers of women aged 20 to 49 have declined the most: 12.5 per cent of women aged 20–29 have left Ukraine, as well as 19.3 per cent of women in the 30–39 and 40–49 age groups.
