Azernews.Az

Nazrin Abdul

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Countries in Europe and Central Asia (ECA) must accelerate efforts to use their existing economic assets more efficiently and invest in the capabilities of firms and workers to unlock faster, more sustainable growth, Azernews reports, citing a new World Bank report.

The report, TIDES of Change: Igniting Productivity Growth in Europe and Central Asia, stresses that while increasing capital and labor is important, it is productivity—how effectively those inputs are used—that ultimately drives economic expansion. A 10% rise in productivity could generate nearly 2 million new jobs across the region, highlighting its critical link to employment, income growth, and competitiveness.

The World Bank notes that the region’s post–global financial crisis slowdown has been driven almost entirely by weakening productivity. Sluggish reforms have allowed market distortions—such as the strong presence of inefficient state-owned enterprises—to persist, preventing resources from flowing to their most productive uses. Limited integration into global markets and weak firm capabilities have further constrained growth. As a result, returns on additional capital investment have fallen sharply.

Had ECA countries maintained their pre-2008 pace of productivity growth, the region’s GDP today could be around 62% higher, the report says.

Exporters—though few in number—are identified as the most productive firms in the region, generating a disproportionately large share of jobs, investment, and value added. Yet, ECA economies trade about 45% less than their potential, pointing to significant untapped opportunities in trade integration and foreign direct investment (FDI). With multinational companies increasingly shifting toward diversified and resilient supply chains, the region stands to benefit—provided governments implement reforms that strengthen the business environment and enhance domestic firms’ ability to link with global value chains.

To unlock this potential, the report calls for renewed reform momentum across five priority areas: trade, investment, digitalization, efficiency, and skills (TIDES).

“The evidence is compelling,” said Asad Alam, Regional Director for Europe and Central Asia, Prosperity at the World Bank. “When competition is strong, when firms can access technology and finance, when trade and investment are open, and when workers have the skills to adapt, productivity rises. Firms grow, hire more people, and innovate—fueling income growth and national progress.”

Drawing on more than 40 million firm-level observations from national statistical and tax authorities across 16 countries between 2008 and 2023, the report provides one of the most detailed analyses to date of productivity trends and constraints in the region.

The findings underscore the need for governments to place productivity at the center of national strategies—by promoting competition, increasing transparency in public procurement, and systematically tracking reform outcomes. With the right policies and strong commitment from policymakers, business leaders, and development partners, ECA countries can regain economic momentum and reshape their long-term growth trajectories, the report concludes.