World Bank: Central and Eastern Europe must innovate to keep growing

Bulgaria, Croatia, Poland, and Romania could boost labor productivity by up to 10–15% through wider adoption of digital technologies — but without faster action, the growth model that lifted millions out of poverty over the past two decades is running out of road, according to a press release published by the World Bank. The findings come from the Bank’s latest EU Regular Economic Report, Innovation Rising: Lifting Central and Eastern Europe’s Jobs and Growth Potential, released today. With the EU economy growing at just around 1% annually, productivity gains of that scale would translate directly into higher wages, more resilient jobs, and stronger long-term growth.

For two decades, the four countries rode a powerful wave of trade integration and participation in European supply chains. That wave is flattening. Shrinking working-age populations and tight labor markets mean the old formula — competing on lower costs and expanding the workforce — has largely run its course.

World Bank Group EU Division Director Anna Akhalkatsi put it plainly: sustaining progress “will depend on raising productivity — through wider use of digital technologies, stronger investment in skills, and clear, predictable rules that help businesses innovate, grow, and compete.” The report identifies a clear weak spot: research and development spending in all four countries sits below 1.5% of GDP, against an EU average of 2.2%. Investment in intangible assets — software, data, management improvements — also lags significantly. In Poland, 26% of corporate investment goes to intangibles, compared to 37% across the EU, while smaller firms in Bulgaria and Romania trail even further behind on digital adoption.

The gap is not just a competitiveness concern — it is a jobs concern. Firms that fail to move up the value chain will struggle to create the kind of productive, well-paying employment that sustains convergence with Western Europe over the long term.

The prescription the report offers is straightforward: mobilize private investment, get capital flowing to the most productive firms, and make sure small and medium-sized enterprises are not left behind in the digital transition. The tools exist — what Central and Eastern Europe needs now is the policy clarity and business environment to use them at scale.