Despite the ongoing war, Ukraine, Russia, and countries in Eastern Central Europe continue to demonstrate economic growth. However, serious challenges are hidden behind these figures.
Impact of the War on the Region
The war in Ukraine has been going on for over two and a half years, dealing a serious blow to the political and social stability of the region. However, the economic consequences of the war are much smaller than expected. Eastern Central European countries that are EU members have been able to adapt to this situation. According to forecasts by the Vienna Institute for International Economic Studies (WIIW), their economic growth in 2024 is expected to average 2.2%, significantly exceeding the EU average.
Russia: Military Economy Driving Growth
Despite sanctions, Russia is showing significant economic growth at 3.8%. The main driver has been the financing of the military industry. In 2024, Russia is spending almost 93 billion francs on defense, which is 6.2% of its GDP. However, analysts believe that this growth rate could slow down due to a shortage of workforce, as many men are involved in the war.
Ukraine: Economic Challenges in Times of War
The Ukrainian economy is also demonstrating growth at 2.7%, despite serious challenges such as workforce shortages, infrastructure destruction, and a significant budget deficit. While the West continues to fund Ukraine’s non-military expenses, Kyiv is forced to increase taxes and seek additional sources of income. Ukraine is also considering the possibility of resuming arms exports to support its economy.
Economic Stability in Eastern Europe
Countries in Eastern Central Europe, such as Poland, show steady growth, despite the crisis in Germany, upon which they heavily depend. Economic growth in the region is driven by high levels of consumption, EU funding, and a decline in interest rates.
Can the region hold on?
While the economies of Eastern European countries demonstrate remarkable resilience, analysts warn that long-term risks persist. If the geopolitical situation worsens or Germany does not emerge from the crisis in the next two years, these countries may face new challenges.
