The World Bank (WB) estimates a slowdown in growth in developing economies in the Europe and Central Asia (ECA) region to 2.5% in the period 2025-2026, for Romania predicting an economic growth of 1.3% in 2025 and 1.9% in 2026, according to the ECA Economic Update Report for the region, published on Wednesday.

Economic growth in developing economies in the Europe and Central Asia (ECA) region is likely to slow, according to the World Bank’s ECA Economic Update Report for the region, published on Wednesday. Growth in the ECA region is now estimated at 2.5% for the period 2025-26, due to weaker external demand and the slowdown in Russia, a WB release said.

According to the cited source, in 2024, growth in the region as a whole stabilized at 3.6%, supported by private consumption and robust real wage growth, higher remittances and consumer credit growth, all of which offset weaker external demand due to reduced economic growth in the European Union.

Higher increases in food and services prices led to higher inflation, which reached 5% in February 2025, from 3.6% in mid-2024. The recent increase in inflation has prompted several central banks to raise monetary policy rates or postpone further easing.

For the region’s middle-income countries to achieve high-income status, their economies need to become more dynamic. Countries that have successfully transitioned to high-income status have done so through entrepreneurial dynamism and innovation, and should sustain this growth by leveraging technology, expertise, and capital to drive productivity growth within companies, the source said.

Innovation and business experimentation are essential for increasing productivity and a prerequisite for achieving and maintaining high-income economy status. Middle-income countries in the region can achieve high-income status if firms grow, innovate and compete. While each country needs its own approach to restarting growth, stimulating innovation and facilitating business dynamism are crucial, said Ivailo Izvorski, World Bank Chief Economist for Europe and Central Asia.

The report shows that there is a need to invest in young and innovative companies, rather than in the entire small and medium-sized enterprise (SME) sector, as these companies generate jobs. This approach should be supported by improving access to finance, in particular long-term and venture capital. The region lacks sufficient finance, as venture capital and equity financing remain underdeveloped.

Stimulating competition is essential to enable the emergence of dynamic firms. The region has too many small, low-productivity businesses and too few large companies outside of state-owned enterprises that often dominate markets and stifle entrepreneurial dynamism. Policies that encourage business innovation and technology adoption, such as greater and better-targeted R&D incentives, are also needed to help firms become more productive and innovative. Many firms in the region currently rely on reallocation of resources and operate as production units for foreign companies, rather than developing their own technologies, the release reads.

Ultimately, investment in human capital is essential for attracting and retaining highly qualified employees and entrepreneurs, as well as for creating opportunities to improve skills through professional training.

AGERPRES