Europe Could Do Even More to Support Ukrainian Refugees

IMF Blog, December 15, 2022

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Almost8 million refugees have fled Ukraine since Russia’s invasion in February, Europe’s largest refugee wave since World War II, with the majority of those now in the European Union.
The figures will increase depending on the war’s duration and severity.
Creating conditions in which refugees can return home once war ends and reconstruction starts is the overarching objective, but refugees may stay in their adopted homelands for some time.

Europe reacted with swift and decisive support; 4.8 million people from Ukraine are registered fortemporary protection in the EU or in similar national programs.
The EU has removed many barriers by offering residency rights, work permits, and access to health care, schools, housing and banking services.
The bloc is providing financing to support refugees in the most affected member states, including Moldova and some other countries, and has modified regulations to make it simpler to reorientate some of its existing funds.
Short-term fiscal cost estimates across the EU:
- Could reach 30 billion euros to 37 billion euros in the first year, or about 0.2 percent of gross domestic product.
- Countries with the largest shares of refugees, including the Czech Republic, Estonia, Moldova, and Poland, could incur fiscal costs this year equal to about 1 percent of GDP.
The larger share of women and children among arrivals will result in more spending on childcare, education, and health care services.

Refugees could boost medium-term economic growth and tax revenue while helping ease labor market tightness in parts of Europe.
Labor force impact estimates:
- Ukrainian refugees could raise the size of Europe’s labor force by some 0.6 percent by the end of 2022.
- In the countries with the largest numbers of arrivals, Ukrainian refugees could raise the labor force by 2.7 percent.
Any increase in unemployment because of the surge in labor is likely to be temporary.
Early signs of integration are promising, with evidence that refugees in Poland and the United Kingdom have found jobs relatively quickly.

Many arrivals have a different demographic profile than past refugee waves; surveys in Germany, Moldova and Poland show that most arrivals are children and women under 40.
Ukrainian refugees tend to be well educated:
- At least half of working-age women have completed tertiary education.
- This share is even higher in some countries, rising to about three-quarters in Germany.
A key risk is skills downgrading if refugees end up in low-paid jobs that do not match their qualifications or skills.

Scale up and tailor active labor market policies to enhance refugees’ skills and labor market success, including:
- Recognition of qualifications.
- Language training.
- Job search and matching services.
Provide affordable care services to enable Ukrainian women to fully participate in host country labor markets.
Ensure central governments adequately fund local governments, which typically administer programs in:
- Active labor market policies.
- Education.
- Healthcare.
- Social welfare.
- Housing.

The need to further support Ukrainian refugees comes at a testing time for Europe, as countries face rising energy and food prices and sharply slowing economic growth.
Continuing strong solidarity is important; policies that help refugees integrate economically will help Europe as well as those fleeing Ukraine.
Lessons from integrating Ukrainian refugees may inform approaches to integrating refugees from other regions who may not have the same skills but can nonetheless contribute positively to growth.

Nicolo Bird, Neree Noumon — December 15, 2022