European countries that share a border with Ukraine and are located near the combat zone lose about one percentage point of GDP growth each year due to the large-scale aggression of the Russian Federation against Ukraine. According to analysts’ estimates, the total losses of the economies of bordering states over the two years of war (2022–2023) have reached 1.8 percentage points of GDP.
This is reported by Finway
The Impact of Proximity to War on European Economies
Experts note that the “cost of proximity” to the war zone amounts to approximately 2 percentage points of GDP for every thousand kilometers reduced in distance to the epicenter of the conflict. It is precisely the countries with the largest area of shared borders with the combat zones that have experienced the most significant losses. The negative effects of the war have impacted all key components of economic growth: private consumption, investment, exports, and imports, which have shown lower growth rates compared to expectations.
“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 epicenter of the conflict, and countries with the highest border density with the war zone have suffered the greatest losses.
Inflationary Pressure and Financial Challenges
According to analytical data, in the first two years of the war, the economic downturn in bordering countries was accompanied by rising inflation, particularly in the energy sector. States closer to the combat zone experienced energy price growth rates that were 2–3 percentage points higher than other EU members located further away. Additionally, these countries saw a noticeable increase in the yields of government bonds and a deterioration in trade conditions.
In 2024, the negative impact of geographical proximity to the war has somewhat decreased – by 0.1–0.2 percentage points annually. This indicates a gradual adaptation of economies to external shocks due to the stabilization of the energy market, diversification of trade channels, and other macro-financial measures.