Eastern Europe’s growth engine is losing momentum – Digitalization is poised to be the next driver

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How can digitalization become the next growth engine for Central and Eastern Europe?” This is the question at the center of the recently released insightful “The Rise of Digital challengers” research from McKinsey. At Dell Technologies, my responsibility as senior vice president and general manager for CEE covers 27 countries, from Poland to Israel. It goes without saying that this study caught my attention, as it combines two topics close to my heart – the quickly changing economic landscape of Central and Eastern Europe and the current challenges and opportunities of digitalization.

Moving to a market economy, CEE countries have enjoyed an economic boom and improved standards of living for the last thirty years, but the current growth engine is losing momentum. Digitalization is poised to be the next driver of sustained growth for the region, with no less than €200 billion of additional GDP by 2025 at stake, according to McKinsey estimates. This opportunity equates to more or less the size of the entire Portuguese economy in 2017 (source: World Bank).

There is however, a key condition necessary for that promise to come true. If CEE wants to fully capture the potential economic opportunities of digitization, it needs to nurture cross-border collaboration. As a frequent traveler across that vast stretch world, I can only confirm the feeling that it is made up of a rich cultural patchwork with a surprising lack of economic bonds. Although the European Union does its best to foster stronger ties between the concerned countries – such as calling for Commissioner Gabriel to institute more participation in the Digital Innovation Hubs’ network – we cannot yet speak of integrated markets such as those found in the Nordics.

I fully endorse McKinsey’s analysis that greater collaboration – at least between some of the CEE countries, if not all of them – should be the top priority for both public authorities and business leaders to leverage a potential market of 1.4 trillion in GDP*, making it the 12th largest in the world.

There is even more rationale in working together to reach scale effects when we know that countries in Central and Eastern Europe fight similar challenges, the most obvious being the brain drain of qualified people – mostly engineers and scientists – to the West.

But they also share strengths. First of all, each boast well-educated populations with particularly strong training in science, technology, engineering and mathematics (STEM). Add to that solid basic R&D capabilities and a substantial manufacturing base and you will be convinced that Central and Eastern Europe should have no inferiority complex. As highlighted in this briefing paper from The Economist Intelligence Unit, this unique heritage from their socialist past has positioned these countries well for developing innovation-driven economies that should now sustain continued improvements in competitiveness and living standards.

Knowing no borders, digitalization is a unique opportunity to make CEE much more than the sum of its parts and to drive it toward the place it deserves on a global level. Together with my colleagues, I consider it part of my mission to help Central and Eastern countries seize win-win opportunities with their neighbors. Do not hesitate to reach out to me with questions or suggestions regarding what Dell Technologies is doing, from the Baltic to the Caucasus.

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