Moldova, like other European countries, needs to stimulate productivity growth to promote GDP growth and increase employment
This is stated in the new World Bank report, “Tides of Change: Igniting Productivity Growth in Europe and Central Asia.” The report notes that in order to accelerate economic growth, countries in Europe and Central Asia must urgently take measures to make more effective use of existing economic assets and invest in developing the potential of businesses and the population. According to the report's findings, simply increasing capital and labor is a necessary but insufficient condition for accelerating economic growth, as this is only one part of the growth equation; the second is productivity, which is an indicator of the efficient use of capital and labor resources. A 10% increase in productivity in this region could create nearly 2 million new jobs, highlighting the close link between productivity and employment growth in all countries and sectors of the economy. The report states that the slowdown in economic growth in the Europe and Central Asia (ECA) region following the global financial crisis was almost entirely due to a slowdown in productivity growth. This decline in growth coincided with a slowdown in reform momentum, which contributed to the persistence of market distortions, such as a significant share of less efficient state-owned enterprises, and prevented resources from being directed to where they could generate the highest returns. Combined with incomplete integration into global markets and weak enterprise capacity, these factors have a negative impact on productivity and limit countries' opportunities. And in the absence of productivity growth, the return on additional capital investment in terms of output growth is lower than before. In addition, the authors of the report note that productivity growth ultimately leads to increased prosperity, more jobs, and higher wages. If productivity growth in ECA countries after 2008 had matched the level prior to the financial crisis, the region's GDP could have been about 62% higher. The report also states that the most productive companies in the ECA region are exporters, and although they account for only a small percentage of the total number of enterprises, in most ECA countries they make a disproportionately large contribution to employment, investment, and value added. In fact, trade flows in ECA countries are on average 45% lower than they could be, indicating that there is significant untapped potential to increase the benefits of trade integration and foreign direct investment (FDI). The good news is that if ECA countries tap into this potential, they will also be able to take advantage of the opportunities offered by the current shift among transnational companies towards more sustainable local value chains. Realizing this opportunity will require reforming the business environment and strengthening the capacity of domestic enterprises to interact more effectively with high-performing transnational companies. The report emphasizes that in order to unlock the region's potential for productivity gains through targeted measures in areas such as trade, investment, digitalization, efficiency, and skills (TIDES), the reform process needs to be accelerated. Regional Director for Europe and Central Asia Asad Alam noted that the countries of Europe and Central Asia have demonstrated an exceptional capacity for transformation, but now the region needs to chart a course forward, overcoming new obstacles such as geopolitical fragmentation, rapid technological development, and demographic shifts. According to him, the region is at a critical juncture. "By restoring the momentum of reform and prioritizing productivity growth, countries in the region can create more and better jobs, raise living standards, and build a more sustainable future. It is time to act," he said. The World Bank report uses new and unique enterprise-level data to provide a fresh perspective on productivity trends, the causes and extent of productivity growth constraints, and the opportunities available to ECA countries. This data collates the results of more than 40 million enterprise-level observations across a wide range of industries, conducted between 2008 and 2023 in all 16 countries and obtained from national statistical offices, tax authorities, and additional sources. The report's findings underscore the urgent need to intensify the reform agenda, including ensuring that governments play a key role in integrating productivity improvement objectives into national plans and budgets, creating conditions for market competition, ensuring transparency in public procurement, and assessing progress in implementing reforms. As noted in the report, with the right economic policies and the commitment of policymakers, large entrepreneurs, and partners, countries in the ECA region can restore growth and change their economic future. //25.11.2025 – InfoMarket.
