In order to accelerate economic growth in Europe and Central Asia (ECA), more efficient use of available resources and investment in skills are key conditions, APA-Economics reports, citing in a World Bank report.
According to the report, increasing capital and labor alone is not enough - increasing productivity is essential for sustainable growth. The World Bank notes that a 10% increase in productivity can create about 2 million new jobs in the region, which confirms the strong link between productivity and employment.
The document emphasizes that the weakening of the growth rate in the ECA region after the global financial crisis was mainly due to the slowdown in productivity growth. The slowdown in reforms, the high share of inefficient state-owned enterprises, weak trade integration and limited skills of companies prevent the full realization of potential. According to the World Bank, if productivity had increased at the previous level, the region's GDP could have been about 62% higher today.
The report also shows that the region’s most productive companies are exporters, and while they represent a small proportion of total companies, they carry the brunt of investment and value creation. ECA countries currently trade on average 45% below their potential, suggesting significant opportunities for foreign investment and trade integration.
The World Bank says that productivity growth requires a renewed push for reforms in trade, investment, digitalization, efficiency and skills. Regional Director Asad Alam noted that “productivity increases when competition is strong, access to technology and finance is expanded, and workers have the skills needed to adapt to new technologies.”
The report’s findings suggest that the ECA region can restore economic growth and move towards a more competitive economic model if governments accelerate reforms with sound economic policies and transparent governance.
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