Europe faces economic cooling as AI integration lags

The World Bank’s latest update signals a broad deceleration across the region. Excluding Russia, which represents 40% of regional output, projections suggest growth will ease from 3.7% to 3%. Central Asia remains a relative outlier, with the Kyrgyz Republic and Uzbekistan expected to maintain robust expansion at 9.6% and 7.9% respectively. Conversely, Ukraine faces a challenging outlook, with growth narrowing to 1.2% due to ongoing infrastructure damage and export constraints.

Antonella Bassani, the World Bank’s Vice President for the region, points to lower energy intensity and strong government responses as buffers against these headwinds. However, the rise of artificial intelligence presents both a solution to shrinking working-age populations and a structural challenge. Currently, fewer than one in ten firms in the region leverage AI, and these deployments are largely limited to basic tasks. While the region possesses strong technical talent and widespread mobile connectivity, it lacks the managerial depth and computing capacity required for deeper integration. Chief Economist Ivailo Izvorski emphasizes that bridging this gap requires a pivot toward private sector innovation, suggesting that governments must prioritize digital infrastructure to convert AI potential into tangible productivity gains.