Bulgaria, Croatia, Poland and Romania could increase labor productivity by up to 10-15 percent through the widespread adoption of digital technologies, in particular software and artificial intelligence-based tools, according to the latest EU Regular Economic Review (EU RER Report) published today by the World Bank Group (WB). With the EU economy growing at around one percent a year, such increases could boost growth, boost wages, and help create more resilient jobs.
The report entitled Innovation Rising: Lifting Central and Eastern Europe's Jobs and Growth Potential finds that the region is entering a new phase of development. Convergence with the EU has helped to build a base for innovation, but sustaining economic growth will increasingly depend on mobilizing private investment and channelling capital to the most productive firms. A faster and wider adoption of new technologies - especially among small and medium-sized enterprises - would help accelerate growth and strengthen competitiveness across the region.
„Central and Eastern Europe has made remarkable progress over the past two decades, with income levels close to the EU's and better prospects for millions of people,” said Anna Akhalkatsi, European Union Division Director at the World Bank Group. „Sustaining this progress will depend on boosting productivity - through wider use of digital technologies, stronger investment in skills, and clear and predictable rules to help companies innovate, evolve, and compete. This is the way economies can create more and better jobs, while strengthening their resilience for the future„.
Over the last two decades, Bulgaria, Croatia, Poland and Romania have experienced rapid income growth through trade integration and participation in European supply chains. This pattern of economic growth is now reaching its limits. As the working-age population is shrinking and labor markets are already tight, it is becoming increasingly difficult to achieve additional gains through expanding the labor force or through lower-cost competition. Maintaining convergence will increasingly depend on productivity growth - spurred by innovation, faster take-up of digital technologies and companies moving up the value chain to create higher value-added jobs.
The analysis also underlines the importance of the speed at which innovation and technology spread through the economy. Spending on research and development in the four countries currently remains below the EU average - less than 1.5% of GDP, compared with 2.2% at EU level. Companies are also investing less in intangible assets such as software, research, data and management improvements. In Poland, for example, 26 percent of corporate investment goes to these intangible assets, compared with 37 percent at EU level. Smaller firms, especially in Bulgaria and Romania, lag behind in adopting digital technologies, so productivity gains are limited. Closing these gaps would help Central European economies reach new growth milestones while creating more productive and resilient jobs.