Europe and Central Asia Economic Update

Data, Digitalization, and Governance

March 30, 2021
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Part one of this report summarizes recent economic developments and presents the outlook for the Europe and Central Asia region. Part two focuses on the topics of data, digitalization, and governance, and provides policy recommendations for harnessing the data revolution to improve governance across the region.


Economic activity in the emerging and developing economies of Europe and Central Asia is estimated to have contracted by 2 percent in 2020, in the wake of disruptions related to COVID-19. The pandemic is expected to erase at least five years of per capita income gains in about one-sixth of the region’s economies and raise the poverty headcount. Economies with strong trade or financial linkages to the euro area and those heavily dependent on services and tourism were the hardest hit.

The pace of recovery in 2021 is projected to be faster than originally anticipated, at 3.6 percent, as firming external demand and stabilizing industrial commodity prices partly offset a recent flareup in new COVID-19 cases.

Growth is then expected to rise to 3.8 percent in 2022, as the effects of the pandemic gradually wane and the recovery in trade and investment gathers momentum. The outlook remains highly uncertain and growth could be weaker than envisioned if the pandemic takes longer than expected to fade, external financing conditions tighten, policy uncertainty spikes, or geopolitical tensions escalate again.

The COVID-19 pandemic has generated a major health and economic crisis in the Europe and Central Asia region, infecting 15.5 million people. The pandemic has also underscored the critical role of clear communication, transparent operations, ample resources, and well-developed plans for an effective crisis response.

The extraordinary circumstances and rapid pace of the pandemic required a focused and decisive response from government leaders. The scope and size of the government’s role in the economy increased to unprecedented levels. The need for an efficient system of information collection and use is more relevant than ever, particularly as the private sector has transformed itself through its use of information to improve the quality of its services.

Data systems could be precisely the tool to build citizen trust in government and create greater citizen pressure for effective, data-driven governance. During the pandemic, data management has been critical to governments’ responses. Citizens have been both dependent on and critically supportive of public sector response—in tracing COVID cases, understanding frontline readiness, and data sharing within the administration, for example.

Because citizen needs were immediate and homogenous, and because the state played an important role in the response, the link between governments and citizens was strengthened—in no small part because of data.

Digitalization is a necessity for improving governance. Across the world, the quality of government is increasingly informed by the extent to which governments harness digital tools and technologies to optimize management, service delivery, and overall state capacity.

Digital technology offers the potential to increase efficiency, transparency, responsiveness, and citizen trust, directly affecting the quality of government. The COVID-19 pandemic has made particularly salient the opportunities for fostering digitization and highlighted the costs associated with delaying the public sector modernization.

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The Office of the Chief Economist publishes a Regional Economic Update every year in both spring and autumn. Each update includes an outlook for economic growth and analysis of a special topic important to the region.


Regional flagship reports analyze trends and key issues in the region and are targeted to a broad audience.



Working papers share researchers’ findings from work in progress to encourage the exchange of ideas about development issues.