Ukraine Refugees: More EU Funding May Be Needed To Alleviate Hosts’ Future Fiscal Pressure

Individuals, relatives and NGOs are providing significant support to the large inflow of refugees from Ukraine. Over time, the national government response as well as the possible joint response of the European Union (EU) member states to offer humanitarian assistance and protection will bring higher public sector costs. Ukraine's geographic EU neighbors such as Poland (rated A, Stable), Slovakia (A (high), Stable), Hungary and Romania will incur higher public expenditures because of the very large numbers of refugees they are receiving. DBRS Morningstar sees flexibility in current EU available funds, but sees the need for future new funding at the EU level.

EU countries have jointly opened their frontiers and the United Nations High Commissioner for Refugees (UNHCR) estimates that more than 4.9 million refugees have crossed Ukraine's borders, with an additional 7.1 million displaced within Ukraine. Although the outflow is decelerating to below 50,000 individuals per day, flows are likely to persist as long as Russia’s military operation continues. Poland is taking in the highest share of refugees (around 53%), with Romania and Hungary accounting also for high shares.

Key Highlights:
-- Private donations might not be enough to support refugees as the humanitarian crisis persists.
-- DBRS Morningstar views positively the possibility to recalibrate existing EU funds but expects that additional funding will be required to alleviate hosts’ fiscal pressure.
-- DBRS Morningstar estimates a cumulative cost of up to EUR 50-60 billion to relocate and offer protection to 5 million refugees in the EU and Norway.

“A prolonged flow of migrants will require mutual EU funding and/or refugee relocations across other member states to alleviate the stress on countries bordering Ukraine. In our view, should military operations continue for a longer period of time, a relocation scheme could be adopted. Theoretically relocating and offering protection to around 5 million refugees across the EU and Norway could cost up to EUR 50 - 60 billion,” said Carlo Capuano, Vice President Sovereign Ratings.