Although GDP per person in EaP countries has steadily increased over the past decade, the regional average is less than a third of the OECD average.
The agricultural sector remains a significant contributor to regional economies, accounting for over 12% of value added in Armenia and Ukraine and over 11% in Moldova, compared to the EU/OECD average of about 2%.
Following the COVID-19 pandemic, Moldova experienced the steepest GDP increase (+13.9% compared to the anticipated 4.5%), followed by Georgia (+10.4% compared to the anticipated 3.5%).
The Russian invasion of Ukraine in 2022 continues to have severe implications for the economy and trade of Ukraine and other countries of the Eastern Partnership, such as neighbouring Moldova, with inflation amounting to 35% (December 2022), growing energy bills, and an influx of refugees.
Environment at a Glance in the EU Eastern Partnership Countries
2. Socio-economic context
Key messages
Context and policy challenges
Since the 1990s, the EaP countries have adopted an open market approach to their economic policies, allowing for land privatisation and price de-regularisation, reducing the issuance of preferential credits to state enterprises, and removing controls on exports and interest rates. Despite strong growth in GDP per person over the past ten years and some progress in reducing poverty, the EaP countries remain among the lowest income in Europe, with an average GDP of less than a third of OECD countries.
The GDP structure has not significantly changed over the last decade, though the share of agriculture and industry has slightly decreased with increased services.
The mining sector plays an important role in most countries, except Moldova, contributing to export earnings, employment and economic growth. This is based on important aluminium deposits, molybdenum, titanium, copper, iron, lead and limestone. According to the 2022 International Council of Mines and Metals Mining Contribution Index, which measures the significance of the mining sector’s contribution to national economies, Ukraine and Armenia are in the top 20, with Armenia’s mineral rents constituting 3% of GDP, while ores and metal exports contributing 44% and 16% of total merchandise exports in Armenia and Georgia, respectively.
Azerbaijan’s oil and gas sector accounts for about one-third of the country’s GDP and nearly all exports. Oil production accelerated after independence from the Soviet Union: in 2014, Azerbaijan was the 21st largest producer of oil in the world and the 32nd largest producer of indigenous gas. Azerbaijan became a strategic transit corridor once new production capacities and pipelines were operational in the early 2000s. Even though Azerbaijan’s exports are dominated by crude oil and natural gas, the country produces a range of minerals and metals, including aluminium, iron ore, bromine and iodine.
However, in 2021, agriculture still accounted for over 12% of value added in Armenia and Ukraine and over 11% in Moldova, compared to the EU/OECD average of about 2%. The significance of agriculture in Moldova and Ukraine is reflected in land use patterns, with both countries showing nearly 60% of the overall area dedicated to permanent crops and arable land.
Like other regions, from early 2020 to 2021, the COVID-19 pandemic posed unprecedented global health, social and economic challenges for the EaP region. After an initial period of dramatic economic downturn in 2020, GDP returned to growth in all countries in the EaP region, surpassing the earlier forecasts in 2021. Moldova experienced the steepest increase (+13.9% compared to the anticipated 4.5%), followed by Georgia (+10.4% compared to the anticipated 3.5%). The pandemic shifted the priorities from environmental measures to immediate socio-economic needs.
Nevertheless, since 2022, the war against Ukraine has had serious implications for other countries of the Eastern Partnership region, such as neighbouring Moldova, with inflation amounting to 35% in December 2022, growing energy bills, and an influx of refugees.
Main trends and recent developments
EaP country governments’ responses to the COVID-19 pandemic initially focused on containing the virus and limiting economic damage. As vaccines were progressively rolled out, governments- in some cases with support from international cooperation partners- drew up ambitious recovery plans with the aim of restarting their economies. Furthermore, several governments issued pledges to ‘build back better’ and adopted net-zero targets by mid-century, e.g. Ukraine (Neuweg, 2021[5]). Exploring the likely environmental implications of these stimulus and recovery measures is important to understand whether the significant sums allocated aligned with the aim of a green recovery and whether they set the stage to “build back better” after the crisis.
Data shows that the total funding volume allocated to measures with a mixed or negative environmental impact was almost five times larger than funding for measures with an environmentally positive impact. Only approximately USD 360 million went to recovery measures with a positive environmental impact from the beginning of the COVID-19 crisis in 2020 to February 2022. Almost USD 1.7 billion was allocated to measures with a mixed or negative environmental impact (Neuweg, 2021[5]). Almost USD 1.8 billion was allocated to existing infrastructure or to measures unlikely to have a sizeable environmental impact (ibid.). These trends show that stimulus packages overall leaned heavily towards business-as-usual type activities rather than the transformational investments required for a green economy transition in the EaP region.
Available indicators
GDP per person
Value added by sector
Population by age
Land use