Edit: It’s been two and a half years since I first wrote this article and in the meantime the IMF (which is the source of the data I used) has released data for 3 more years: 2017, 2018 and 2019. So, it was time to update the analysis below. Please note that the changes are mostly in the second half of the article.
Since the fall of the Iron Curtain the countries in Central and Eastern Europe have gone through profound transformations and the road from a socialist style planned economy to free market economy was not easy.
Some countries, like Poland, Czechoslovakia and Estonia, opted for “shock therapies”, and while these hurt during the first few years, they laid out the foundations for a smoother transition process. Others, like Romania and Bulgaria chose a more conservative path, which, unfortunately for them, made the entire transition process much longer and much more painful.
This is perfectly reflected in the evolution of each country’s GDP per capita indicator in the 90s. And, as the graph below shows, the countries in the first group fared better through the decade than the countries which opted for a slower transition.
Greece is not really part of the CEE region, but I’ve included it in the charts to show how the transition economies managed through the 90s compared to a free market economy. Looking at a chart where the Greek economy looks solid actually feels good. 🙂
In contrast with Greece, for Romania and Bulgaria the 90s can almost be considered a lost decade. In 1990 Bulgaria had a GDP/capita at Purchasing Power Parity of $8,451, over 30% higher than Poland’s $6,568. By the end of the decade, Poland’s GDP/capita was 52% higher than Bulgaria’s. If we look at the nominal values, the situation is even more dramatic: in 1990 Bulgaria’s GDP/capita was $2,266, 29% higher than Poland’s $1,626 and 159% smaller in 1999 (Bulgaria: $1,623 vs Poland: $4,340).
The rest of the CEE countries had good growths through the 90s, Greece, Slovenia and Poland being the growth champions.
The 2000s started strong for all the analyzed countries, with economic growth accelerating and peaking just before the big financial crisis of 2007-2008. The peak GDP growth figures for each country for the decade are: 11,89% for Latvia (2006), 11.08% for Lithuania, 10.80% for Slovakia (2007), 10.27% for Estonia (2007), 8.46% for Romania (2008), 7.67% for Bulgaria (2007), 7,03% for Poland (2007), 6.94% for Slovenia (2007), 6.87% for the Czech Republic (2006) 5.65% for Greece (2003), 5.55% for Croatia (2003) and 5% for Hungary (2004).
The table below summarizes the 2000 – 2008 interval, in which the GDP per capita grew steadily for all the analyzed countries.
In absolute terms, the highest GDP per capita growths were recorded in Lithuania, Estonia and Slovenia with increases of over $12,000, followed closely by Slovakia, Latvia, the Czech Republic and Greece, all with increases of over $11,000. However, if we look at the relative growth, the situation is a bit different: the top performers were Lithuania and Latvia, with growths of over 130%, followed by Romania with 118%, Bulgaria with 109% and Estonia with 100% growth. All these countries managed to more than double their GDP per capita during this 8 year interval.
While gathering the data, I was a bit surprised to see that Poland had a poor performance in terms of GDP per capita growth in this interval, but they more than compensated for this by being the only country in the EU to avoid a recession when the financial crisis came.
While the impact of the financial crisis is not that visible when we look at the GDP per capita charts (especially at the Purchasing Power Parity), it hit very hard and some of the analyzed countries are still trying, 10 years later, to recover:
- Greece only managed to return to growth in 2014 ( a modest 0.35% growth) before falling again into recession.
- Croatia endured 6 years of recession, with 2015 being the first year of growth (a moderate +1.65%)
- The Baltic countries took the hardest blow, 2009 bringing them all negative growths of over -14%. Among the three, Lithuania recovered fastest, coming back to growth the next year, Estonia endured two years of recession and Latvia three.
- The other CEE countries, even though hit by the crisis as well, suffered smaller losses when compared to the Baltic states.
Greece has slowly but steadily been overtaken by the majority of the Central and Eastern European countries and the ones who have not already caught up with it are on their way of doing so. If we look at the situation just 10 years ago, Greece had the highest GDP/capita among the analyzed states and roughly 2.1 times higher than Romania’s ($29,441 vs $13,993). By 2019, Greece has already been surpassed by the Czech Republic, Slovenia, Slovakia, Lithuania, Estonia, Poland, Hungary and Latvia and it can feel Romania quickly approaching and if we would compare Greece with Romania again, we would see that it’s GDP/capita is now just 1.1 times higher ($30,510 vs $27,750).
Croatia’s problems are also visible in it’s GDP per capita evolution. While 10 years ago it was ahead of Poland, Latvia and Lithuania and almost on par with the likes of Hungary and Slovakia, by 2019 it has been overtaken by Poland, Latvia and Romania and left in the dust by Hungary, Lithuania and Slovakia.
Now, let’s look at the big picture and see how each country fared during the last 26 years.
- for Croatia, Latvia and Slovenia I used the value from 1992, for Estonia and Slovakia the value from 1993 and for the Czech Republic and Lithuania the value from 1995
The growth champions of the last 26 years are Lithuania, Latvia and Poland which more than quadrupled their GDP (PPP) / capita. Estonia and Slovakia come close, with a growths of 387% and 350%, followed by Romania who managed a decent growth of 277% of it’s per capita GDP at purchasing power parity.
The poorest performers are Greece, the Czech Republic, Bulgaria and Hungary, but save Bulgaria, the other three had higher numbers to start with. If we look at the absolute values, the Czech Republic’s growth is actually pretty similar to Latvia’s, who is one of the top performers measured in percentages.
- As source for the GDP data, I have used the International Monetary Fund.