Digital Technology Could Boost Productivity in Europe by Up to 15%, World Bank Says

With the European Union economy growing at roughly one percent per year, productivity improvements driven by technology could play a crucial role in sustaining economic progress across Central and Eastern Europe.

Bulgaria, Croatia, Poland, and Romania could increase labour productivity by 10 to 15 percent through wider adoption of digital technologies—particularly software and artificial intelligence tools—according to the World Bank Group’s latest EU Regular Economic Report.

The report, titled “Innovation Rising: Lifting Central and Eastern Europe’s Jobs and Growth Potential,” highlights how stronger digital adoption could help the region accelerate economic growth, raise wages, and strengthen job resilience.

Productivity Gains Key to Future Growth

With the European Union economy growing at roughly one percent per year, productivity improvements driven by technology could play a crucial role in sustaining economic progress across Central and Eastern Europe.

According to the World Bank, the region is entering a new phase of development, where maintaining growth will depend less on expanding labour supply or competing on lower costs, and more on innovation, digital adoption, and higher-value production.

“Central and Eastern Europe has made impressive progress over the past two decades, bringing incomes closer to EU levels and expanding opportunity for millions of people,” said Anna Akhalkatsi, Division Director for the European Union at the World Bank Group.

“Sustaining that 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.”

From Catch-Up Growth to Innovation-Led Development

Over the past two decades, Bulgaria, Croatia, Poland, and Romania have experienced rapid economic progress, driven largely by integration into European markets and participation in global supply chains.

However, the report notes that this growth model is reaching its limits.

Several structural challenges are emerging, including:

• Shrinking working-age populations

• Tight labour markets

• Reduced potential for growth through low-cost competitiveness

As a result, future economic progress will increasingly depend on productivity improvements and technological innovation.

Digital Adoption and SME Innovation

The report emphasizes that the speed at which new technologies spread across businesses will play a major role in determining the region’s future growth.

In particular, small and medium-sized enterprises (SMEs)—which form the backbone of the region’s economies—are lagging in digital adoption.

This is especially evident in Bulgaria and Romania, where many smaller firms have yet to integrate advanced digital tools into their operations.

Faster adoption of technologies such as:

• Artificial intelligence

• Advanced software systems

• Data analytics

• Digital management tools

could significantly improve productivity and competitiveness.

Investment in Innovation Still Below EU Average

The report also points to a gap in research and development (R&D) spending across the region.

Currently, the four countries invest less than 1.5 percent of GDP in R&D, compared with the EU average of 2.2 percent.

Businesses in the region also spend less on intangible assets, such as:

• Software development

• Research and innovation

• Data infrastructure

• Management and organizational improvements

For example, 26 percent of corporate investment in Poland goes toward intangible assets, compared with 37 percent across the EU as a whole.

Closing this investment gap could help the region move toward higher-value economic activity and more resilient job creation.

Strengthening Competitiveness and Job Quality

The World Bank concludes that expanding digital adoption and increasing investment in innovation could help Central and Eastern European economies:

• Improve productivity

• Create higher-quality jobs

• Strengthen economic resilience

• Maintain convergence with Western European income levels

By enabling firms to move up global value chains, these reforms could support long-term economic growth and competitiveness across the region.

More information is available in the full report:worldbank.org/eurer