Financial rating agency Morningstar DBRS published a commentary this week, highlighting that economic convergence is set to continue across several medium-income European economies.

The process will be supported by faster income growth and the gradual alignment of productivity levels with those of higher-income nations.

However, the rating agency noted that the convergence process will remain uneven among different countries.

Distinct growth dynamics are expected to become increasingly evident between the two primary groups pursuing convergence, namely Central and Eastern Europe and Southern Europe.

Differences in economic structures and individual country challenges are projected to translate into divergent long-term growth performances.

Despite these variations, maintaining a stable trajectory of economic convergence will remain an important credit factor for sovereign credit ratings.

Morningstar DBRS stressed that establishing conditions to sustain high investment levels over time will be of critical importance.

This necessity is becoming more urgent as the negative impact of demographic trends, particularly the shrinking labor force, is expected to intensify in coming years and weigh increasingly on growth potential.

“The ability of economies to maintain a high level of investment, despite the intensifying shrinkage of the labor force, is expected to be a decisive factor in the evolution of income growth and, by extension, their future growth dynamics,” said Marius Schulte, Assistant Vice President of the Global Sovereign Ratings Group.