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[document content] - "With growth in Europe and Central Asia having peaked at 2.7 percent in 2017, policy makers face new challenges. How can they navigate the expected cyclical downturn? How can they boost underlying potential growth that has slowed, especially since the global financial crisis? How should they adjust regulations and reform policies to benefit from the digital revolution while mitigating the transition costs? This report summarizes the economic outlook for the region and examines the adoption of new blockchain technologies. In doing so, it touches on all three challenges. The 2017 rates of growth of GDP (2.7 percent) and private consumption (2.5 percent) were faster than at any time since the global financial crisis of a decade ago. Growth was especially strong in Central Europe and in Turkey, but it was robust in other parts of the region as well. Unemployment rates are now close to their 2007 levels in most countries, and average inflation exceeds 2 percent, indicating that little spare capacity is left. Deceleration of growth is expected to be modest, but a sharper correction remains possible. Cyclical forces can easily reinforce one another, and additional shocks—rising protectionism, geopolitical tensions, larger than expected disruptions caused by Brexit—could materialize. There is little room for further monetary stimulus if the expected slowdown is sharper than expected. The region has rebuilt some fiscal buffers, however. The average fiscal deficit in 2017 is estimated at just above 1 percent of GDP, down from 6 percent during the 2009 crisis and close to levels at the end of the boom that preceded that crisis. Fiscal stimulus is thus an option in several countries in case of a sharper than expected slowdown. Under the baseline scenario of only a modest deceleration, however, a further buildup of fiscal buffers seems the best strategy. Many countries in the region have proven to be fertile ground for the development of cryptocurrencies and blockchain technologies. The emergence of these technologies is part of a broader wave of technologies that facilitate peer-to-peer (P2P) commerce, the individualization of products, and the flexibilization of production methods. For a variety of reasons, these trends gained traction after the global financial crisis a decade ago. Blockchain technologies aim to organize P2P transactions and P2P information flows without intermediaries and central banks have opportunities to use blockchain technologies to improve their services. It is unclear how these technologies will develop in the long run; their ultimate impact may be very different from the current applications. In response, policy makers should strike a balance between curbing the hype surrounding these new technologies and unleashing potentially transformational new opportunities. While encouraging and facilitating these innovations, they should prepare to craft new regulations to create a level playing field for new and old industries, by adjusting financial oversight, consumer protection, and tax administration. They should also address the massive volume of electricity used to mine cryptocurrencies. "