Economic growth in Europe and Central Asia (ECA) has slowed but the region continues to show resilience despite ongoing global and regional challenges, according to the World Bank’s latest Europe and Central Asia Economic Update: Jobs and Prosperity.
The report projects that regional GDP will grow by 2.4 percent in real terms this year, a decrease from 3.7 percent in 2024. This slowdown is mainly due to weaker economic expansion in the Russian Federation. When Russia is excluded, growth across the rest of the region is expected to remain steady at about 3.3 percent for both this year and next.
Antonella Bassani, World Bank Vice President for Europe and Central Asia, said, “Developing economies in the region need to undertake bold reforms to translate resilience into stronger growth in productivity, output, and jobs that fit with the region’s shifting demographics and capitalize on their natural advantages. It is important for countries to strengthen their private sectors, improve education, and connect better internationally, regionally, and domestically, while attracting more private capital. The region’s challenge is to increase job opportunities and transform low-skill jobs into high quality employment.”
The report highlights that investing in infrastructure as well as improving the business environment are critical steps toward boosting productivity. Mobilizing private capital will also play a key role.
It also notes that building strong foundations for jobs—such as physical infrastructure and human capital—is essential. Improving education quality, especially vocational and higher education programs, remains necessary. Women and young people are still underrepresented in the labor force despite untapped potential.
While employment in ECA has increased by 12 percent over the last 15 years—with services now accounting for more than half of all jobs—most new positions have been relatively low-skilled with limited earning potential.
Demographic trends present additional challenges: The working-age population is expected to shrink by 17 million over coming decades—a decline focused on Eastern and Central Europe as well as the Western Balkans. In contrast, Central Asia and Türkiye will see an increase in working-age populations which will create different pressures on labor markets.
Structural barriers such as many small firms that rarely expand, undeveloped credit markets, underperforming education systems, subdued competition levels, and state-owned enterprises limiting market efficiency further constrain progress.
Ivailo Izvorski, World Bank Chief Economist for Europe and Central Asia stated: “Each country can tailor its approach to best use its assets—human talent, physical infrastructure, institutions, and natural resources. Expanding job opportunities can benefit nearly all workers as different industries require different skillsets. Focusing on these areas gives policymakers a real chance to tackle the jobs challenge and generate growth.”