Edit: Eurostat has just released the 2018 data on the Actual Individual Consumption, so it is time for a new update to this article.
What is the Actual Individual Consumption and why is it a relevant indicator of a country’s level of economic welfare?
According to Eurostat, the Actual Individual Consumption (AIC) “refers to all goods and services actually consumed by households. It encompasses consumer goods and services purchased directly by households, as well as services provided by non-profit institutions and the government for individual consumption (e.g., health and education services).”
So, I think the AIC per capita is a valid enough indicator to measure and compare the relative welfare of consumers across the European Union.
Let’s start with the current situation:
As you can see in the map above, the divide between east and west is still clearly visible. With the exception of Lithuania, all the former socialist countries have AIC/capita levels below 90% of the European Union average. There’s also a north – south divide, with the countries in the south having an AIC/capita about 20-25% lower than the countries in the north and center of Europe.
From the European Union member states, Luxembourg has the highest AIC/capita (132% of the EU average), while Bulgaria has the lowest (56% of the EU average). If we also consider the non EU countries, then Albania is on the last place, with an AIC/capita of just 38% of the EU average, followed closely by Bosnia & Herzegovina and North Macedonia, both at 41% of the EU average.
Now, what this map doesn’t show us is the evolution of the indicator in each of the countries. I have gathered and processed the data for the 2000-2018 interval and, in order to make the evolution comparison easier, I have split the countries in 3 groups, each with it’s own specific characteristics:
- Central & Eastern Europe
- Southern Europe
- Western & Northern Europe
I will start with the Central & Eastern European countries, because they had the largest dynamic during the chosen interval.
I would further split these countries into a three groups:
- high growth: Lithuania (+47% compared to the EU28 average and 109% compared to the value in 2000), Romania (+41% and +141%), Estonia (+32% and 76%), Latvia (+32% and +84%), Slovakia (+26% and 51%), Bulgaria (+26% and +87%) and Poland (+25% and +48%)
- moderate growth: the Czech Republic (+17% and +25%), Croatia (+15% and +31%), Hungary (+11% and +20%)
- no growth: Slovenia (-1% and -1%)
So while Lithuania gained the most % relative to the EU28 average (+47%) , it is actually Romania that had the largest relative growth compared to the value in 2000 (+141%), followed closely by Lithuania with +109%, both of them more than doubling their per capita individual consumption.
I find it interesting to observe how certain countries caught and/or surpassed other countries which 18 years ago were way ahead of them:
- while in 2000 Hungary had an AIC/capita 82% higher than Romania (53% HU vs 29% RO), by 2018 Romania has surpassed Hungary and now has an AIC/capita 9% higher than Hungary (64% HU vs 70% RO).
- in 2000 Lithuania had the 5th lowest AIC/capita in the region. By 2018 it surpassed 6 countries and is now by far the region leader for this indicator.
- on the other hand, in 2000, Hungary had the 3rd highest AIC/capita among the region. Now it has the 3rd lowest, and there are chances that it will be overtaken by Croatia soon.
- in 2000 Slovakia had a 29% average consumption deficit compared to the Czech Republic (66% CZ vs 51% SK), but in 2018 it has been reduced to only 7,8% (83% CZ vs 77% SK)
Another interesting thing (that is not visible in the chart above though) is the speed at which the Central and Eastern European countries are converging with their richer union partners. Some of the CEE countries have already caught up some of the Southern European countries: Lithuania has already surpassed Greece, Portugal and Malta and reached the same level as Spain (90%) while the Czech Republic, Slovakia, Poland and Slovenia have caught up with Greece (or as I like to say Greece “caught down” with them).
Unlike the CEE countries, all the Southern European countries suffered decreases in AIC/capita compared to the EU28 average: Italy (-19%), Cyprus (+2% for the entire interval, but -17% since it’s peak just before the financial crisis) and Greece (-15%, but -29% since the 2008 peak) registered the largest decreases.
Now, for the Western and Northern European countries there are a few interesting observations to be made.
We have one big gainer, Finland, which in 2000 was 5% below the EU28 average and now it caught up with it’s more richer neighbours in Northern Europe, standing 12% above average. We also have three losers: Luxembourg (-26%), Netherlands (-19%), Ireland (-13%) and France (-10%). For the rest of the countries, the variation was small, the indicator staying inside the 109-124 interval for the entire interval.
What conclusions can be drawn from this analysis?
Well, first of all, that Central and Eastern European countries are catching up with their Western and especially Southern neighbours. I think that in time the east-west divide will become more and more blurry, while the north-south divide will become more and more clear.
Then, that some countries are more successful than others in transferring the economic growth towards their population. Some country pairings will be interesting to watch on short to mid term: Slovakia vs Czech Republic, Croatia vs Hungary are my top picks.