Productivity growth in CEE outpaces the EU

Today we delve into one of the special topics covered in the recent Autumn 2024 Economic Forecast of the European Commission, which zooms in on the potential trade-off between employment and productivity growth in the EU. The past decade (period between 2014 and 2023) was characterized by sustained employment growth, combined with a mild slowdown in labor productivity growth. While employment growth dynamics were pretty much the same in the whole EU and the region over the last decade, productivity growth in CEE outpaced that of the whole EU. Comparing the dynamics to the previous decade's developments (period between 2004 and 2013), employment growth recovered (in CEE, employment actually contracted on average between 2004 and 2013), while productivity growth slowed. According to the European Commission, changes in the workforce's composition likely did not contribute to the productivity slowdown, as the employed population became progressively more educated and experienced, particularly in the region. Most of the productivity dynamics appear to be driven by intra-sector dynamics, underscoring the role of sluggish investment. Additionally, the slowdown can be attributed to weaker total factor productivity growth, stemming from reduced technological diffusion and a decline in innovation performance.