investment needed to close half the gap is 3 percent of GDP a year or less, given the larger initial infrastructure stock (IMF 2020).

ECA’s sizable investment gaps are related partly to shortcomings in the efficiency of public infrastructure investment relative to EU peers (figure 9.B). In Bulgaria, for instance, the same public investment outcomes could have been achieved with considerably less investment spending (less by about 2 percent of GDP), had the efficiency of public investment and quality of infrastructure been closer to peers (IMF 2022a).

Education. Although average years of education in ECA are among the highest of the EMDE regions, there is significant scope for increased investment, beyond gross fixed investment, to improve basic and tertiary education in ways that would raise labor productivity (World Bank 2020b). The OECD’s PISA scores and learning-adjusted years of schooling suggest that the subregions and countries where improvements in the quality of basic education are needed most are Central Asia (Kazakhstan, the Kyrgyz Republic, Tajikistan, and Uzbekistan); the South Caucasus (Azerbaijan and Georgia); the Western Balkans (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, and North Macedonia); Moldova; and, in Eastern Europe, Bulgaria and Romania, which are among the EU countries that invest the least in education, including public expenditures on teachers and training, education infrastructure, digital learning, and equity and inclusion. Early childhood education is also important. On average, children who attend preschool stay in school nearly a year longer and are more likely to be employed in high- skill jobs. Highquality interventions in the early years have a high benefit-cost ratio and can deliver annual returns of about 13 percent on investment (García et al. 2016).

In some economies in ECA, particularly in Central Asia, inadequate investment in human capital has left parts of the workforce poorly equipped for rapid technological change (Flabbi and Gatti 2018). Low educational attainment among the workforce and inadequate skills have often been cited as constraints on doing business, job creation, and innovation in ECA (Brancatelli, Marguerie, and Brodmann 2020; World Bank 2019a). An aging workforce, a declining working-age population share, and high emigration rates among young and skilled workers in ECA highlight the need for education, training, and retraining to help workers adapt to new job requirements and technologies (Aiyar, Ebeke, and Shao 2016; Hallward-Driemeier and Nayyar 2018). Access to retraining programs, particularly for workers in the hardest hit sectors— whether from the pandemic or automation—can play an important role in facilitating their re-employment.

The COVID-19 pandemic underscored the critical need for investment in digital skills and technology to ensure educational continuity, as well as for resources to upgrade information and communications technology infrastructure to support virtual learning, particularly for more vulnerable households. Digital approaches to remote learning that were developed during the pandemic can be leveraged to broaden access to affordable education across EMDEs, including in ECA (Li and Lalani 2020). There is wide divergence in internet access, with some EU members having rates similar to those in euro area countries, while Central Asia lags even the EMDE average.