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Part I: Recent Developments, Policies, and Outlook

Economic growth in Europe and Central Asia has slowed but the region has remained resilient amid continued global and regional challenges. Regional gross domestic product is likely to grow by 2.4% in real terms in 2025, down from 3.7% in 2024, because of a weaker pace of expansion in the Russian Federation. Growth in the region is expected to pick up only modestly to 2.6% on average in 2026-2027.

Private consumption remains the main driver of growth across the region, although its pace is moderating as real wage gains ease and job creation slows.

Part II: The Jobs Challenge

Weakening reform momentum and slowing productivity growth have resulted in positive but modest job creation across the Europe and Central Asia region after the 2008 Global Financial Crisis. Much of that growth has been driven largely by higher participation rates and a shift from agriculture into services. But many of the new service jobs have been in low-skill occupations.

Demographic headwinds—including aging and lower fertility rates—and slowing productivity growth threaten the resilience of the region’s labor market, compounding the jobs challenge. Changing this will require bold reforms, specifically ramping up investment in infrastructure, improving the business environment, and mobilizing private capital.

Tackling the Jobs Challenge: Sectoral Opportunities by Subregion

The region’s heterogeneity implies that countries cannot follow a single approach to tackling the jobs challenge. For instance, compared to the rest of the region, the demographic pressures are different in Central Asia and Türkiye, where increasing the number of jobs employing the growing young population is an urgent priority. In the Western Balkans or Central Europe, in a context of a shrinking workforce, it will be crucial to upgrade jobs in terms of quality and productivity. Success will depend on country ownership, tailored approaches, and leveraging assets such as human talent and natural resources.

• Central Asia: The region's sectoral growth is likely to be likely to be driven by expanding agrifood and livestock processing. Central Asia will also benefit from developing transport and logistics along Eurasian corridors, investing in renewable energy, and targeting specific manufacturing niches. In addition, the tourism industry can leverage the region’s exceptional heritage sites and rich cultural assets.

• Central Europe: The most promising dynamic opportunities center on manufacturing and energy value chains, modern tradable services, and support for the aging population. The countries of Central Europe (Bulgaria, Croatia, Poland, and Romania) have strong potential in green manufacturing and energy, as well as a broad range of offshore business services, including software development, business process outsourcing, accounting, and architectural and engineering services. 

• South Caucasus: The region stands out for opportunities in renewable energy and exportable digital business services. The South Caucasus’s position on the Middle Corridor also creates a platform for growth in regional transport and logistics services

• °Õü°ù°ì¾±²â±ð: The country's biggest opportunities for growth and job creation lie in tradable services and logistics, upgrading global value chain–linked manufacturing, renewable energy, care services that increase female participation, and digital and information and communications technology–enabled services.

• Ukraine: The country's economy is undergoing a significant transformation, with the emergence of new sectors and productivity upgrades in existing industries likely to contribute to job creation. Information technology and digital industries, along with agriculture and agro-processing, have emerged as Ukraine’s main comparative advantages. In addition, defense and associated industries have the potential to generate employment opportunities for skilled workers.

• Western Balkans: The region presents robust opportunities for agribusiness and food processing, tourism diversification and upgrading, targeted light manufacturing (notably automotive parts), and care services.

   

GDP Growth Summary 2022-2027