EU's key economic trends for the years to come

Author : Tymur Chmeruk

Source : 112 Ukraine

Today, there are no really significant reasons for the growing trend of the European economy to change
13:30, 20 March 2018

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Unfortunately, despite the fact that Ukraine is moving towards Europe, Ukrainians are not very aware of the internal policy of the EU, especially in the economic sphere. But we still have much to learn from our European partners. Frankly speaking, today's economy of our country is quite dependent on the European Union, therefore the internal plans and trends of the western neighbors are directly influencing us. Here are my observations, the main trends of the EU economy for the coming years.

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Unemployment rate

Unemployment rate EU

People in Ukraine are accustomed to the fact that the main indicator of the country’s success is GDP level, and for the EU, the level of employment is more important factor. After all, the low level of unemployment influence the well-being of individuals and their confidence in the future, not only on the total number of goods and services. Unemployment in the EU is gradually declining, but its level is in each country is different: in Germany, it is 4.1%, in Greece it is 23.6%. In general, the EU plans to achieve an employment rate of 75% by 2020.

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The level of GDP

Although GDP growth is not a priority in the economic policy of the EU, it directly reflects the level of economic growth, which in turn makes it possible to improve the level and quality of life of the citizens. This is especially important after the crises of the past. Since 2013, the overall level of the EU countries is gradually growing, and now I do not see any prerequisites for changing this trend.

Change in real GDP of the EU (%)

Unlike Ukraine, where the very fact of GDP growth is considered positive, in the EU this growth should be accompanied by concern for the environment, improving the quality of life of the Europeans. And this is possible, despite the development of the economy: the level of greenhouse gas emissions and the share of renewable sources in the energy sector are close to the planned indicators.

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For Ukraine, this means that most likely, the volume of mutual trade will continue to increase, and the strict environmental rules of the EU will encourage Europeans to withdraw part of the production beyond the EU borders. Ukraine, in this case, can become an investment-attractive option.

Export growth

Gap between the exports and imports, EU

It is no secret that the goods, produced in the EU, are quite competitive in world markets, so the trade balance has been positive for 3 consecutive years. In addition, almost a third of export trade falls on the services market. But the level of imports to the EU countries remains quite high and amounts to about 2.5 trillion euros. Thanks to the Association and Neighborhood Agreement, Ukraine has all chances to increase exports to the EU, but in order to sell value-added products, one must withstand tough competition in this market and meet high-quality standards. In addition, a decrease in the level of unemployment increases the level of wages. Given low-interest rates in Europe, it is more profitable for businesses to modernize production and hire few, but highly skilled workers. But in Ukraine the situation is completely opposite: bank rates are very high, and wages are low. This leads to the creation of enterprises in the territory of Ukraine (where a large number of workers are required), aimed specifically at supplying goods and services to the EU. Simply put, Ukraine is gradually becoming the main outsourcing platform for the EU countries of Europe.

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Growth and reduction of the budget deficit

Budget deficit EU

The budget of the European Union is not the total budget of all the member countries. One of the main functions of the budget is the redistribution of finance between more and less developed member countries. There are fewer donor countries than recipient countries. And Brexit (the UK has been bringing about 5 billion euros to the budget) could potentially become a problem. However, Germany, where the budget surplus is 14 billion euros, would likely cover these losses. Subsidies from the EU budget are becoming an instrument for influencing countries that violate European norms. However, Poland as the largest recipient of funds was provided with all the necessary funds, despite EU’s dissatisfaction with the reform of courts and migration policy.

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Migration Policy

Europe is aging noticeably. The average age in the European Union is almost 43 years. In order to somehow save the situation, every woman in countries such as Italy, Spain, Greece, Portugal, and Poland, should give birth to at least one child. Against the background of economic growth, there is a shortage of labor. Therefore, a large number of European countries are fairly loyal to the labor migrants. Traditionally, the main flow of migrants comes from the Middle East and Africa. But after Ukraine has received the visa-free regime and taking into account the instability in the country, migration from Ukraine to the EU will only increase. For example, Poland willingly attracts culturally close Ukrainians; this trend is gradually expanding further to the west. In general, as of 2016, the number of migrants in the EU amounted to 1.54 million people, of which 1.26 million received the refugee status. For comparison, in 2012 these figures were 0.89 million and 0.34 million, respectively.

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In general, from all the above figures I can draw the following conclusions. Unlike Ukrainian economy, the economy of the European Union is in excellent condition. And today there are no really significant reasons for the growing trend to change. However, we must take into account the challenges of population aging and of the migration. Therefore, for Ukraine, the EU should continue to be a powerful and reliable economic partner. But in order to expand this partnership in the future, we need to work hard on reforms to become more attractive for the investors. If we do our "homework", we have every chance that the economic well-being of the EU will spread to our country too.

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