investment prospects, other structural headwinds are weighing on potential growth over the remainder of the decade, including low labor force participation and weak productivity growth (World Bank 2020e).

In Poland, also, all drivers of potential growth are expected to weaken in the remainder of this decade. TFP gains from earlier reforms are expected to fade as the country continues to close its per capita income gap with the EU. The disbursement of Next Generation EU funds has been delayed, dampening investment, compounding existing challenges with the absorption of funds, and threatening a missed opportunity to boost TFP given that investments and reforms associated with these funds must be implemented by end-2026. The contribution from labor force growth is expected to become negative as the working-age population declines, though this could be partly offset by the immigration of Ukrainian workers—an upside risk to the baseline forecast.

Elsewhere in ECA, potential output growth in 2022-30 is projected to be either stronger than, or close to, the growth rates of 2011-21. In some Central European and Western Balkan economies, faster growth is expected to be driven by sizable EU-related spending. Potential growth in these economies could be even stronger than projected in the baseline if the associated reforms are successfully implemented (World Bank 2022i). In particular, national targets for increasing R&D spending could support digital and green agendas and help raise TFP growth above the baseline.

Although potential growth prospects vary across the region, demographic headwinds are expected to intensify in each ECA economy as populations age and with birth rates remaining low (European Commission 2021). Consequently, the working-age shares of populations in ECA economies are expected either to continue increasing more slowly or to fall from peaks reached a decade ago or earlier; the shares of those retiring are expected to rise. Without policies to bolster labor-force participation rates, improve job opportunities to discourage emigration, and better integrate immigrants, labor-force growth will continue to fall and could become a drag on potential growth, with added fiscal challenges. Thus, the average contribution of labor-force growth to potential growth in ECA is projected in the baseline to fall from 0.3 percentage point a year over 2011-21 to less than 0.1 percentage point a year over 2022-30. For 9 of the 13 countries with available data, labor-force growth is expected to be a drag on potential growth. Even in the countries where this is not the case—Türkiye and the countries of Central Asia—the contribution in 2022-30 is expected to be weaker than in 2011-21. Türkiye, in particular, suffers from low labor force participation: its employment rate in 2019, at 54 percent, was nearly 20 percentage points below the EU average, reflecting, in particular, a large gap in female participation and employment (34 percent in Türkiye versus 67 percent in the EU).

The baseline projection is subject to many risks related to the possibilities of further pandemic outbreaks and a more prolonged or severe conflict in Ukraine than presently envisaged. Even after the pandemic and war recede, they may have lingering effects in increasing inequality by magnifying existing disparities and causing large human capital