World Bank Group Europe and Central Asia Economic Update – October 2026
Worldbank.org. Developing economies in Europe and Central Asia continue to demonstrate economic resilience despite slowing growth, high energy prices, and heightened global uncertainty. The region’s economic activity is projected to ease to 2.2% this year from 2.6% in 2025. Artificial intelligence (AI) has the potential to offset declining productivity and reinvigorate economic expansion, but organizational constraints, limited computing capacity, and poor data readiness are holding the region back. To capitalize on AI’s potential, countries will need to expand affordable access to computing capacity while strengthening foundational, digital, and managerial skills.
Part I: Recent Developments, Policies, and Outlook
Growth in the developing countries of Europe and Central Asia is likely to slow in 2026 amid higher energy prices, heightened uncertainty, and weaker economic expansion in the region’s main trading partners. Regional gross domestic product is expected to weaken to 2.2%, down from 2.6% in 2025.
Countries in the region continue to show resilience, with the impact of global commodity-market disruptions more limited than earlier feared. Temporary government relief measures have also partly contained the impact of higher energy costs on households and firms, although in some countries they have added to fiscal pressures. Favorable labor-market conditions, rising real wages, remittances, tourist arrivals, and public investment have helped support economic growth in the face of global headwinds.
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Part II: Making AI Work
Slowing productivity growth remains a serious concern for the region’s economic competitiveness, resilience, and job creation. Artificial intelligence could help offset shrinking working-age populations and boost productivity, yet organizational constraints, limited computing capacity, and poor data readiness are hindering AI adoption across the region.
To make the most of AI, governments need to invest in upskilling the workforce by: (1) strengthening foundational, digital, managerial and business-oriented skills, (2) strengthening data and expanding affordable access to computing capacity, and (3) developing effective social protection and labor-market programs to support workers and firms through the transition.
Key Highlights: Making AI Work for Jobs, Firms, and Productivity
- AI and other digital technologies could help address both the jobs and productivity challenges facing the developing economies of Europe and Central Asia, but these countries risk falling further behind the technology frontier as adoption remains limited and often shallow.
- About one-in-five workers in Europe and Central Asia hold jobs meaningfully exposed to AI, concentrated among well-educated, young, and women workers — yet usage of AI does not necessarily equate with exposure, and exposure does not equate with job displacement or creation.
- Fewer than one-in-ten firms use AI in their business operations, roughly half the share of firms in the EU.
- With slowing growth and working-age populations set to contract sharply in most of the region by 2060, AI has the potential to raise output per worker and compensate for the loss of labor as a driver of growth.
- Some of the region’s digital foundations are largely in place, but adoption is constrained by a deficit in computational resources, organizational readiness, and data integration. Data center capacity in the developing economies of Europe and Central Asia stand at roughly 2.1 megawatts per million people, compared to 31.6 megawatts in high-income countries outside the region.
- Most firms in the region apply AI broadly but shallowly — accelerating routine tasks such as customer inquiries, internal knowledge management, and document preparation — without measurable productivity effects.
- STEM graduates are plentiful across Europe and Central Asia, but business-oriented engineers and managers who can redesign operational processes are scarce. Demand for AI workers has nearly quadrupled in the region, and early labor market signals point to reduced hiring rather than displacement, with some augmentation of existing workers’ tasks.
- Data is often abundant but siloed and unstructured, limiting AI deployment. Concerns over data leakage, output accuracy, uncertain returns on investment, and evolving regulation discourage firms from moving beyond experimentation.
- Governments across the region are adopting AI broadly but shallowly, primarily for internal processes. Notable exceptions — such as Türkiye’s monthly AI-based VAT fraud scoring and Ukraine’s AI-integrated national digital services platform — demonstrate what is possible when governments move beyond shallow adoption.
- The policy priority for the region should be adoption and adaptation: expanding affordable access to compute, investing in foundational and business-oriented technical skills, structuring data as a public good, and supporting workers transitioning to AI-complementary roles. The main risk over the next decade is too little AI, adopted too unevenly — not too much.
