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Opinion
December 21, 2018 www.intellinews.com I Page 25
decades to come. Our analysis shows that developing the region’s digital economy across all sectors would bring significant economic benefits, given the resulting productivity gains,” says the McKinsey report.
“By closing the digital gap with Northern and Western Europe, CEE could earn up to €200bn
in additional GDP by 2025 — a gain almost the size of Portugal’s entire economy in 2017. In this aspirational scenario, the region’s digital economy would grow to represent 16% of GDP by 2025. That would mean up to 30% additional GDP growth, the equivalent of one extra percentage point on GDP growth each year over the period.” Specifically, digitisation would help by improving the region’s productivity by boosting e-commerce and offline consumer spending on digital equipment.
On the other hand, “[t]he alternative “business
as usual” scenario is one in which the digital economy in CEE maintains its historical growth rate, expanding by just €60bn and representing 8.7% of GDP in 2025,” the report continues. “In this scenario, CEE countries would miss out on the additional one percentage point of annual GDP growth and remain a long way from the “digital frontier” represented by the countries of Northern Europe, for example.”
Economists from the Vienna Institute for International Economic Studies (wiiw) also stressed the importance of investment into productivity in a new report on the region. In a webinar to present the report on November 7, wiiw economist Richard Grieveson referred to the current “very significant” labour shortages as “the main positive risk for the region” — should they force a rethink of investment.
“Vacancy rates are very high. There is really substantial unmet labour demand, which has never been seen before,” said Grieveson. “One possibility which we are seeing, and are cautiously optimistic will continue, is that firms are paying higher wages and investing in productivity upgrading.
Well placed to invest
McKinsey analysts consider countries in the CEE region “are uniquely positioned to capture the digital opportunity”. It describes the 10 countries covered in the report as “digital challengers” given their strong potential for growth in digital. This means they have the potential to follow “digital front-runners”, namely relatively small European countries with very high digitisation rates like Estonia, Ireland and the Scandinavian countries.
For comparison, the digital economies across the digital challengers accounted for 6.5% of their com- bined GDP in 2016, which put them almost level with the EU Big Five (6.9%), but behind the digital front- runners. On the other hand, the growth rates of the digital economies in the digital challenger countries in much faster than those of the EU Big Five at 6.2% per year between 2012 and 2016.
“Although most industries in digital-challenger countries lag behind their equivalents in digital- front-runner countries, some are almost level with EU Big Five benchmarks — for example, financial services and information and communi- cation technology (ICT),” says the McKinsey re- port, which also lists positive factors such as good primary and secondary education with respect
to maths and science literacy. Then there is the large talent pool in the science, technology, engi- neering, and mathematics (STEM) and ICT sec- tors, with no less than 230,000 graduates in these subjects in 2016, which is more than any of the EU Big Five markets and twice as many as the entire digital front-runner region. The CEE digital chal- lengers have also invested into high-quality digital infrastructure, and are less hidebound by older technology infrastructure than the Northern and Western European countries.
All this has helped the development of a vibrant emerging digital ecosystem, with a conducive environment for software development and game development, for example, and the emergence of a growing number of “unicorns” with valuations of more than $1bn, among them Czech antivirus