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Title page 1

Contents 4

Acknowledgments 6

Abbreviations 7

Country codes 8

Regional classification used in this report 9

Executive summary 10

PART I. Recent Developments, Policies, and Outlook 12

Recent economic developments 13

Economic Policies 26

Outlook 29

Annex 1A. Data and Forecast Conventions 35

PART II. Better Education for Stronger Growth 36

Introduction 37

Educational enrollment and attainment are high in most countries in the region 39

The quality of primary and secondary education has been declining 42

The quality of higher education in ECA is problematic 48

Even with lower quality, strong demand for talent has boosted returns to education 54

Making the talent of ECA flourish 56

References 61

Tables 5

TABLE 1.1. Europe and Central Asia economic growth summary, by subregion, 2021-26 14

TABLE 1.2. Europe and Central Asia economic growth summary, by country, 2021-26 17

TABLE 2.1. Number of universities in the top 500 of Times Higher Education ranking, by region and country 51

TABLE 2.2. Returns to higher education in Europe and Central Asia, by country, 2016 and 2022 54

Figures 5

FIGURE 1.1. Recent developments: GDP growth, 2022-24 18

FIGURE 1.2. Recent developments: Consumption 20

FIGURE 1.3. Recent developments: Consumer loans 21

FIGURE 1.4. Recent developments: Investment 22

FIGURE 1.5. Recent developments: External sector 23

FIGURE 1.6. Recent developments: Inflation 25

FIGURE 1.7. Economic policies: Monetary 27

FIGURE 1.8. Economic policies: Fiscal 28

FIGURE 1.9. Outlook 30

FIGURE 1.10. Risks 31

FIGURE 1.11. Slowing convergence and productivity growth 33

FIGURE 1.12. Demographic and human capital challenges in ECA 34

FIGURE 2.1. ECA citizens attain a high level of basic (primary and secondary) education 40

FIGURE 2.2. Tertiary gross graduation rates are substantially high in Europe and Central Asia 41

FIGURE 2.3. The population under 20 years of age will shrink in most of Europe and Central Asia by 2050 42

FIGURE 2.4. PISA math scores have declined in the last years in Europe and Central Asia 43

FIGURE 2.5. Vocational track students come from a lower socioeconomic background than general track students 46

FIGURE 2.6. Vocational track students perform considerably worse in math than general track students 47

FIGURE 2.7. The quality of higher education in Europe and Central Asia is particularly low when compared to the quality of basic education 48

FIGURE 2.8. A worse quality of higher education is associated with a worse proficiency in cognitive skills among adults 49

FIGURE 2.9. Unemployment rates among higher education graduates have fallen in the last years 55

Boxes 5

BOX 1.1. Global growth: Resilient but modest 15

BOX 2.1. Improving access to early childhood education in Uzbekistan 40

BOX 2.2. Is vocational education and training in Europe and Central Asia helping graduates? 44

BOX 2.3. Understanding the brain drain from Europe and Central Asia 49

BOX 2.4. How do higher education systems around the world support research, entrepreneurship, and innovation? 52

BOX 2.5. Consolidating tertiary institutions to improve quality, reduce expenses, and adjust to demographic changes 59

BOX 2.6. The potential role of higher education institutions in re-skilling older workers 60

Box Tables 5

TABLE B1.1.1. Consensus growth forecasts 15

Box Figures 5

FIGURE B1.1.1. Global outlook 16

FIGURE B2.2.1. Enrollment in vocational education among upper-secondary students is particularly high in Europe and Central Asia 45

FIGURE B2.3.1. Countries with a smaller share of people with higher education see the highest levels of high-skilled emigration 50

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