Economic Growth in ECA: A Call for Action
Economic growth in middle-income countries across Europe and Central Asia (ECA) has witnessed a notable decline since the early 2000s, primarily due to global uncertainties and lackluster progress on structural reforms following the 2007-09 Global Financial Crisis. As these nations grapple with a challenging environment, particularly slower growth in the European Union, the road to achieving high-income status appears increasingly daunting.
However, a new report from the World Bank urges these countries to seize the moment and accelerate economic growth through robust policy changes. Despite the global headwinds, the report highlights that a vibrant private sector is crucial for advancement, citing how ten nations in the region have transitioned to high-income status since 1990 due to their dynamic entrepreneurial ecosystems.
To bolster growth, middle-income countries must create environments conducive to attracting global technology, expertise, and capital. The focus should shift from broad initiatives aimed at small and medium enterprises (SMEs) to targeted support for young, innovative firms—drivers of job creation and economic dynamism.
Key recommendations include enhancing access to long-term finance and risk capital, reshaping vocational education to meet current industry needs, and fostering competition against dominant state-owned enterprises, which often stifle innovation. Addressing these barriers will empower companies to harness technology and improve their operational efficiency.
Investing in human capital is also pivotal, as upskilling the workforce will aid in retaining talent and driving productivity. The report emphasizes that each country must tailor its policy mix to reignite growth while focusing on competition, global integration, and innovation.
In summary, the World Bank’s latest Economic Update posits that proactive measures in these areas can enable ECA countries to not only overcome current challenges but also to set a course toward sustainable economic growth.
By Ivailo Izvorski and Leonardo Iacovone, World Bank
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