Outlier or not? The Ukrainian economy’s preparedness for EU accession

In 2023, the reconstruction costs for Ukraine are estimated to exceed $400 billion, with no end to the war in sight. This appears to create insurmountable hurdles for Ukraine's EU accession prospects. Even without the need to compensate for war damages and losses, the financial burden of EU alignment is substantial for any country and usually eased by EU support in the form of pre-accession aid and foreign investment. Facing this challenging outset, our study aims to highlight that Ukraine can leverage EU strategic direction to align its costly reconstruction with economic modernisation. We propose that a synergistic approach lays a strong foundation for Ukraine’s economic eligibility for EU membership.

Ukraine’s unique challenge: Survival, recovery, rebuilding and EU accession

Ukraine applied for EU membership on February 28, 2022, right after repelling the attack on its capital, Kyiv, as part of the full-scale invasion that Russia began on February 24. Marking a significant policy shift, the European Council granted Ukraine candidate status on June 23, 2022, following the European Commission's initial opinion. One-and-a-half years later, on December 14-15, 2023, the European Council will decide on the further steps in EU-Ukraine relations, based on the Commission’s 2023 enlargement report. For the Ukrainian people, the path to EU accession is the important light at the end of the tunnel, though there may be unclear perceptions about what this entails: 60 per cent of participants in a recent survey by the Rasumkov Centre, believe that their country will be able to join the EU in less than 10 years.

Managing a strategic dilemma 

Ukraine’s road to recovery and EU integration faces the dichotomy of addressing immediate needs versus long-term sustainable transformation. Essential emergency aid and infrastructure repairs must be balanced with “building back better” and modernising Ukraine’s economy so that, in line with deeper EU integration, disparities are reduced and Ukraine prepares for the single market. Macro-financial assistance is also critically important. Moreover, Ukraine, unlike previous EU joiners, is integrating into a bloc that is itself under pressure to adapt and reform in unprecedented ways to assert a strong role in a new global context.

Our study wants to draw attention to synergies and map Ukraine’s potential 

Ideally, Ukraine’s reconstruction and economic restructuring for EU accession go hand in hand. Utilising the accession process to stimulate economic growth and modernisation today can directly contribute to transformative rebuilding. Our study assesses Ukraine's readiness for EU membership compared to the Central and Eastern European joiners since 2004 and the current candidates – vis-à-vis the economic Copenhagen Criteria, which remain relevant despite evolving EU policies. This approach allows us to identify and highlight Ukraine's economic strengths and vulnerabilities, to be utilised and further developed or addressed in the processes of reconstruction and deeper integration.

The result of our data-driven comparison is mixed but encouraging

Ukraine is not an outlier. The country has shown resilience and policy stability, crucial for economic development. Before Russia’s full-scale invasion Ukraine’s macro-financial position was generally sound. Its most significant economic challenge lies in its relatively low productivity. A vital aspect of the success in both reconstruction and progress driven by EU accession efforts hinges on the return of its workforce that fled the war. Key sectors like agriculture and information technology point to growth potential in other industries. Breaking the cycle of weak foreign investment and strengthening institutional frameworks, along with tackling demographic challenges, is vital.

A well-executed EU accession strategy could serve as a critical catalyst for Ukraine’s economy, not only enabling Ukraine to emulate the convergence success of previous EU-CEE countries, but also to achieve sustainable and green advancement.