Publication: Europe and Central Asia Economic Update, Fall 2025: Jobs and Prosperity
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Published
2025-10-07
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2025-10-07
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Economic growth in Europe and Central Asia eased to 2.4 percent in 2025, reflecting a sharp slowdown in the Russian Federation. Outside Russia, growth momentum remains broadly resilient, supported by private consumption, infrastructure spending, and a gradual recovery in trade. While a modest pickup is expected in 2026–27, growth is likely to remain well below the 2000–19 average. In this slow-growth environment, downside risks dominate, with the potential for setbacks in reforms posing a significant threat to investor confidence, private sector dynamism, and job creation.
The region's labor market shows signs of resilience but faces deep-rooted structural challenges. Since the start of transition from planned to market in the early 1990s, employment has grown faster than the region's population, driven by rising labor force participation and a shift out of agriculture. Yet most new jobs are in low-productivity services, and productivity growth has stalled. Demographic pressures — aging, shrinking workforces, and emigration —add to the strain. Structural bottlenecks, including weak competition, limited access to finance, and outdated skills systems, constrain firm growth and innovation. The report calls for a three-pillar reform agenda: invest in foundational infrastructure for jobs, strengthen the business environment, and mobilize private capital. Targeting five priority sectors—manufacturing, agribusiness, tourism, healthcare, and energy—can help turn growth into better jobs and shared prosperity.
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“Cusolito, Ana Paula; Izvorski, Ivailo; Kasyanenko, Sergiy; Lokshin, Michael M.; Torre, Iván. 2025. Europe and Central Asia Economic Update, Fall 2025: Jobs and Prosperity. © World Bank, Washington DC. http://hdl.handle.net/10986/43740 License: CC BY 3.0 IGO.”
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