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Industrial Policy
The resilience of the countries of Europe and Central Asia is tested again by the conflict in the Middle East and rising energy import prices. Growth in the region is likely to slow to 2.2 percent on average in 2026–27 from 2.6 percent in 2025. The increased attention to industrial policies has occurred as productivity and jobs growth has weakened. While certain tailored industrial policies can help address well-identified market failures, countries across Europe and Central Asia will need to press ahead with structural reforms to create jobs, build a more dynamic private sector, and boost productivity.
Greater Heights: Growing to High Income in Europe and Central Asia
Since 1990, 27 countries across the globe have reached high-income status, with 10 from Europe having joined the European Union. Another 20 countries from Europe and Central Asia have found their prospects for growing to high-income troubled, with concern they may have become caught in a so-called "middle-income trap." This partly reflects the slowing pace of progress on structural reforms at home and a deteriorating global environment. This report outlines how these middle-income countries across the region can reach high-income status by adopting a 3i strategy of investment, infusion, and innovation.
Jobs and Prosperity
Growth in the developing economies of Europe and Central Asia is expected to slow from 3.7% in 2024 to 2.4% in 2025, driven primarily by a weaker pace of expansion in the Russian Federation. The region is also facing a serious jobs challenge, where most of the jobs created over the last 15 years have been in relatively low-skilled roles with limited earning potential. Investing in infrastructure, improving the business environment and mobilizing private capital will be critical to jumpstarting productivity, creating jobs, and building a more resilient labor market given the region’s shifting demographics.
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The Office of the Chief Economist provides guidance on strategic priorities and technical quality of economic analysis in the Europe and Central Asia region.
This mission is accomplished through an analytical program that challenges conventional wisdom, takes on new, topical and controversial issues, and provides cross-sectoral and region-wide analysis, and serving as principal regional spokesperson inside and outside the Bank on strategic and economic issues facing the region.
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Meet The Chief Economist
Mr. Izvorski's research activities and publications have focused on issues related to debt, international trade and finance, and innovation and growth.