The main long-term challenge is moving towards a more balanced growth and financing model, which is more reliant on domestic innovation and on higher investment spending than it has been so far. This will only be possible if domestic institutions and governance are improved. Those countries that joined the euro area have continued improving their institutional quality, partly owing to the accession process.
In the other EU countries of the region, efforts to improve institutional quality have been more mixed in recent years. Overall, institutional quality is still below the euro area average in almost all CEE economies.19 Convergence is an ongoing process and reforms introduced over the past few years should not be rolled back.