Over the last five years, the digital economy has been a key contributor to the economic development of Central and Eastern Europe. The countries of the region, which we call “digital challengers,” outperformed Western and Northern Europe in both GDP growth and growth of the digital economy. The digital economy has three main components, each of which we analyze in our latest report: spending on information and communications technology (ICT), spending on digital equipment, and digital commerce.
Digital commerce has been the main growth driver for the digital economy. Digital commerce accounted for over 80 percent of growth of the digital economy between 2019 and 2021. In fact, digital commerce shot ahead by two to five years during the COVID-19 pandemic. Several e-commerce players in the region offer great alternatives to global players thanks to their strong focus on customer experience and innovation, and the rapid development of marketplaces.
Despite this progress, digital challengers still lag behind many other European countries when it comes to the penetration of digital commerce. That suggests there is still more potential in the region for accelerating growth. In our scenario, speeding up growth of the digital economy could unlock more than 200 billion euros in additional annual GDP for the region by 2030. Driving this acceleration would be, first and foremost, digital commerce.
How can we make that happen? Businesses can unlock further value from digital commerce by striving to become more centered on digital consumers, focusing on innovation and personalization, investing in their data capabilities, developing ecosystem solutions, ensuring smooth fulfillment processes, and building customer trust. At a policy level, governments can support digitization by developing the digital talent base, strengthening the digital infrastructure, and facilitating export and cross-border trade and cooperation.
To realize the full potential of digital, progress is needed in the area of ICT, which currently lags behind other regions in terms of growth. Advances in the digital economy make both companies and entire countries more resilient to crises. Post-pandemic shocks and recent geopolitical and macroeconomic instability in the region are putting pressure on individuals, businesses, and countries as a whole. They need to respond in order to build resilience and respond to the highly volatile situation marked by rising inflation.
Our analysis shows that countries with more advanced digital economies experienced a milder economic slowdown during the first waves of the pandemic than those that lagged behind on digital. Countries need more investment in digitization in the public and private sectors, broader communication networks, improved data analytics, and greater digital fluency on the part of their populations. That will enable them to respond better to crises, and buffer any negative impact on their economies. In other words, digitization is not just a driving for economic growth—it makes a powerful contribution to a country’s economic stability.