EU Countries Near Ukraine’s Borders Lose Up to 1% of GDP Annually Due to Russia’s War

European Union states that directly border the conflict zone in Ukraine lose about one percentage point of GDP growth each year due to the full-scale war initiated by Russia. According to analysts, over the two years of the war—2022 and 2023—the total GDP losses for border countries reached 1.8 percentage points.

This is reported by Business • Media

The Impact of the “Cost of Proximity” to the War

Experts note that the so-called “cost of proximity” to the conflict zone is estimated at about 2 percentage points of GDP for every thousand kilometers reduction in distance to the epicenter of hostilities. Countries with the longest borders with the war zone have suffered the most significant economic losses. The negative impact is evident across all key components of economic growth: private consumption, investment, exports, and imports show dynamics significantly lower than expected.

“The cost of proximity” to the war zone, according to analysts, is about 2 percentage points of GDP for every 1,000 km reduction in distance to the conflict’s epicenter, and countries with the highest border density with the war zone have experienced the greatest losses.

Energy, Inflation, and Economic Adaptation

According to the European Commission, in the first two years since the onset of hostilities, the decline in business activity was accompanied by a significant rise in inflation, particularly in the energy sector. Countries located closer to the war zone recorded price growth rates for energy resources 2-3 percentage points higher than those in more distant EU member states. Additionally, these countries faced a noticeable increase in government bond yields and a deterioration in trade conditions.

However, considering data for 2024, the negative impact of geographical proximity to the war zone is gradually weakening—its intensity decreases by 0.1-0.2 percentage points each year. This indicates a gradual adaptation of economies to external shocks due to the stabilization of the energy market, changes in trade channels, and other macro-financial mechanisms.