According to the Fraser Institute’s latest Economic Freedom of the World report, Ukraine has once again found itself in the group of the least economically free countries in the world. Ukraine is currently ranked 143rd among 165 countries and territories, a slight improvement from the previous 150th place.
The annual Economic Freedom of the World report assesses the level of economic freedom in five key areas: the size of government, the legal system and property rights, access to sound money, the freedom to trade internationally, and the regulation of labor markets and business activities.
“Where people are free to use their own abilities and make economic choices, they live richer, happier, longer, and healthier lives,” says Matthew Mitchell, senior fellow at the Fraser Institute and co-author of the report.
The latest report released in September designs the rankings based on 2023 data. Thus, this is the second annual report that allows us to see the impact of the full-scale invasion on the country’s level of economic freedom. It is important to note that only in 2020 and 2021 Ukraine was out of the group of the least economically free countries, having climbed into the slightly freer third quartile.
With the wartime effect, it is not surprising that we see a trend toward reduced predictability in the regulatory environment, an expanded role for the state in the economy, restrictions on international trade, and so on. At the same time, legislative changes necessary for the development of entrepreneurship and attracting investment, such as in the area of the rule of law, have taken a back seat.
As the authors of the report note, the level of economic freedom has begun to decline in both Ukraine and Russia since 2022, as militarized conflicts often go hand in hand with low levels of economic freedom. “It is safe to say that war is detrimental to economic freedom,” write the authors of the report, Robert Lawson, Ryan Murphy, and Matthew D. Mitchell. And the centralization of the economy contributes to war, as militarized central planners are prone to wage war against their neighbors.
Here is how Ukraine scored in key components of economic freedom (from 1 to 10, where higher values indicate greater economic freedom):
- Size of government: deterioration from 5.83 to 5.80 (128th rank)
- Legal system and property rights: deterioration from 4.58 to 4.57 (108th rank)
- Access to sound money: improvement from 4.68 to 5.26 (143rd rank)
- Freedom of international trade: deterioration from 6.05 to 5.99 (132nd rank)
- Labor and business regulations: deterioration from 4.67 to 4.58 (150th rank)
The full report can be found at: https://www.fraserinstitute.org/