EIB Report Highlights Innovation Progress and Challenges in CESEE Region

EIB Report Highlights Innovation Progress and Challenges in CESEE Region

(IN BRIEF) The European Investment Bank (EIB) presented a report at the Invisso Conference in Vienna examining innovation progress in Central, Eastern, and South-Eastern Europe (CESEE). While the region has made significant strides in R&D and labor productivity, challenges such as labor shortages, insufficient risk capital, and low R&D investment compared to other EU regions remain. The report highlights a deceleration in innovation growth and stresses the need for targeted policies to improve skills and secure investment. Despite these hurdles, CESEE countries continue to be vital for Europe’s competitiveness, with key innovation activities concentrated in sectors like manufacturing and ICT.

(PRESS RELEASE) LUXEMBOURG, 14-Jan-2025 — /EuropaWire/ — At the Invisso Conference in Vienna, the European Investment Bank (EIB) unveiled a comprehensive working paper that analyzes innovation trends in Central, Eastern, and South-Eastern European (CESEE) countries, exploring the region’s competitiveness in the broader context of the European Union’s long-term economic discussions. Over the past decade, CESEE countries have made notable strides in enhancing their innovation capacity, yet persistent challenges remain that threaten future growth and competitiveness.

The paper highlights significant progress, including a notable increase in R&D personnel, which has doubled, and a rise in investments in intellectual property, growing from 10% to 12%. Furthermore, the region’s labor productivity has outpaced that of North and West Europe, with an annual growth rate of 1.9%. However, this growth faces a deceleration trend, signaling that the region’s competitive momentum may be slowing.

A major challenge for the CESEE region is the lack of skilled workers and the limited availability of risk capital, which inhibits the adoption of advanced technologies and the creation of a more innovative business environment. Labour shortages are already pushing some firms to relocate their innovation activities from the North and West EU to the more affordable CESEE region, and even within the region, innovation efforts are shifting towards its less developed areas.

Kyriacos Kakouris, Vice President of the EIB, stressed the importance of innovation investments for the region’s continued progress: “Convergence requires significant support for innovation investments, particularly in R&D and workforce skills in the CESEE region. At the EIB, we are committed to strengthening the innovation landscape through our collaborations with local stakeholders and international partners.”

Despite these advances, the working paper also highlights several critical gaps. For instance, R&D spending in the CESEE region is much lower than in the more developed parts of the EU, accounting for just 0.8% of GDP, compared to 1.8% in North and West Europe. Additionally, the region is home to only eight of the world’s 2,500 largest R&D investors. Germany alone filed nearly 25,000 patents in 2023, while the entire CESEE region filed only 1,600.

The report emphasizes that innovation efforts in CESEE are concentrated in sectors like manufacturing, ICT, and pharmaceuticals, but there are wide disparities in innovation activities across countries and firms. As a result, while productivity growth in CESEE has outpaced that of North and West Europe, the overall rate of innovation growth is showing signs of slowing.

Debora Revoltella, Chief Economist at the EIB, commented, “Innovation is essential to improving living standards and strengthening the competitiveness of the CESEE region. Our findings highlight the need for targeted policies to improve the availability of skilled labor and secure adequate risk capital, such as venture capital, to foster innovation-driven growth and transition the region to a more sustainable growth model.”

The paper also features dashboards that provide a country-specific overview of innovation characteristics, showing how research-intensive sectors contribute to GDP growth in different CESEE countries. This report is part of a joint study on the competitiveness of CESEE countries conducted by the Oesterreichische Nationalbank (OeNB), the Vienna Institute for International Economic Studies (wiiw), and the European Investment Bank (EIB).

Background information

EIB

The European Investment Bank (ElB) is the long-term lending institution of the European Union, owned by its Member States. It finances investments that contribute to EU policy objectives. EIB projects bolster competitiveness, drive innovation, promote sustainable development, enhance social and territorial cohesion, and support a just and swift transition to climate neutrality.

The EIB Group, which also includes the European Investment Fund (EIF), signed a total of €88 billion in new financing for over 900 projects in 2023. These commitments are expected to mobilise around €320 billion in investment, supporting 400 000 companies and 5.4 million jobs.

All projects financed by the EIB Group are in line with the Paris Climate Accord. The EIB Group does not fund investments in fossil fuels. We are on track to deliver on our commitment to support  €1 trillion in climate and environmental sustainability investment in the decade to 2030 as pledged in our Climate Bank Roadmap. Over half of the EIB Group’s annual financing supports projects directly contributing to climate change mitigation, adaptation, and a healthier environment.

Approximately half of the EIB’s financing within the European Union is directed towards cohesion regions, where per capita income is lower. This underscores the Bank’s commitment to fostering inclusive growth and the convergence of living standards.

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SOURCE: European Investment Bank