Ukraine's EU accession could dramatically boost GDP by up to 26%

Ukraine's potential membership in the European Union (EU) could significantly change its economic landscape. A report by the Polish Economic Institute projects that Ukraine's GDP could increase by as much as 26% within two years post-accession, driven mainly by integration into the EU customs union, greater access to European supply chains, necessary economic reforms, and new inflows of EU funds. The modeling in the report suggests various scenarios where Ukraine's GDP gains could vary depending on key factors such as population trends and productivity growth. From 2021 to 2024, trade between Central European countries and Ukraine saw substantial growth, with a notable increase in exports driven by the war and needs for rebuilding infrastructure. Poland emerged as a significant trade partner, being the largest importer of Ukrainian goods and the second-largest global exporter to Ukraine after China. This changing trade dynamic is attributed to the disruption of trade routes due to Russia's invasion, prompting Ukraine to redirect its trade through Central Europe. Poland is suggested to leverage this new position to enhance foreign direct investment and explore active investments through partnerships and joint ventures. While the accession could elevate Ukraine's economy, the report also warns of potential downsides should unfavorable political and military outcomes arise. In the event of military defeat or an unfavorable ceasefire leading to increased Russian dominance, Ukraine risks losing access to the Black Sea, which serves as a vital export route. This could lead to an estimated GDP drop of over 22%. The potential exclusion from EU structures and long-term implications of regional instability could hinder foreign investments further. The historical context of Ukraine's relationship with the EU includes the 2014 Association Agreement, which established a Deep and Comprehensive Free Trade Area (DCFTA). The full effect of this agreement took place in September 2017. Following increased aggression from Russia, the EU implemented Autonomous Trade Measures to eliminate tariffs and quotas on Ukrainian goods. Despite the positive projections of EU membership, experts emphasize the need for Ukraine to continue aligning with EU standards and implementing reforms to ensure maximum benefits from such a significant geopolitical shift.