October 19, 2017

Economic growth for the Europe and Central Asia region will reach 2.2% in 2017, according to the World Bank’s latest Regional Economic Update, Migration and Mobility in Europe and Central Asia. This represents the strongest growth in the region since 2011, and is 0.3 percentage points above the Bank’s previous forecast in May 2017.

Growth in Europe and Central Asia comes on the back of stronger industrial production and more exports in recent months, lifting most countries in the region out of recession. Unemployment rates have dipped below pre-financial crisis levels in several countries, while labor participation rates have simultaneously risen above their 2008 levels.

Despite these important gains, however, the region still faces challenges that are testing political and economic cohesion. According to the report, new technologies are impacting the distribution of income and wealth, with many workers struggling to adjust to the new skills demand of the digital economy. In addition, the number of full-time, permanent jobs as a share of total employment has declined, as flexible contracts become the dominant employment arrangement for younger workers. This rise in the share of flexible contracts is increasing the efficiency of firms and individuals, but also creating new forms of inequality and insecurity.

“Growth is returning to the region, which is certainly good news,” says Hans Timmer, World Bank Chief Economist for Europe and Central Asia. “At the same time, however, new technologies that provide new growth opportunities are bringing about more flexible labor contracts and more uncertainty. This has increased anxiety among people. And recent concerns over the influx of refugees can be seen as a manifestation of that heightened anxiety.”

The Europe and Central Asia region has experienced a sharp increase in the numbers of refugees and asylum seekers in recent years, from 3.7 million in 2014 to 6.4 million in 2016. This large influx has created new challenges and heightened public concern over migration. The report finds, however, that refugees and asylum seekers account for only a small share of total migrants in countries across the region – with the exception of Turkey, which was host to 3.1 million refugees in 2016.

Migration has played an important role in meeting demands for labor, supporting trade, and encouraging foreign direct investment in countries across Europe and Central Asia, says the report. Migration also promotes the transfer of knowledge between host countries and countries of origin – increasing exposure to flows of information that can create economic benefits.

The report recommends that countries in the region pursue policies that ensure the successful integration of migrants into society, in order to fully exploit the benefits of migration. But policies should not focus on migration challenges in isolation. Rather, reforms should help both migrants and non-migrants alike cope with rapid technological development and increased flexibility in labor markets, thereby reducing insecurity and sharing the benefits of economic growth more broadly across society.