GDP in Hungary compared to the rest of Europe since the change of regime

English2021. ápr. 8.Tamás Fellegi

Wage convergence is a frequently discussed topic, but now we will look at how Hungary’s economic output, i.e. its GDP has changed compared to most EU countries since the change of regime and since joining the European Union.

Different leagues 

In the period before the current crisis caused by the epidemic, economic growth in Hungary was among the biggest in the European Union and even in Europe as a whole. Although this has not always been the case in the 30 years since the change of regime, the overall performance is still impressive. It is particularly interesting to see that there are considerable differences in how much closer Hungary got to each country, which indicates that

since 1990, the growth dynamics of the developed countries that were already members of the union at that time has varied significantly. 

We will be using nominal, i.e. actual figures, because calculating on the basis of purchasing power parity would often lead to numbers that seem distorted, which is partly due to the fact that it is extremely difficult to compare price levels in different countries (also because of different consumption patterns). 

Huge differences 

In 1990, at the time of the change of regime, there was a huge gap between the Eastern Bloc and the countries operating on the basis of a market economy. The comparison is most spectacular if we take Hungary's GDP per capita as 1, and look at how the GDP in other countries compares to it. In this comparison, Austria’s GDP per capita was 7, Germany’s (whose reunification took place in that year) was 6, just like Belgium and Great Britain. Italy was 5, Spain 4, and Greece was 3, which shows that even the South-European countries were light-years ahead of Hungary

From the change of regime to the EU accession 

Over the next 14 years, a significant change took place: the former countries of the Eastern Bloc switched from trading with poor-quality products (Comecon) to production for the world market, integrating into the world economy. During this process, not only did their GDP grow, but the value of their currency also increased from the extremely low levels before as their production became competitive, even though this process was often accompanied by high inflation.

GDP per capita of countries with a market economy (belonging to the Western bloc before 1990) compared to Hungary; Hungarian data = 1
Source: IMF, Eurostat
1990 2004 2020
Ausztria 7 3 3
Németország 6 3,4 3
Franciaország 6 3,4 2,5
Hollandia 6,4 4 3
Belgium 6 3,5 2,8
Nagy-Britannia 6 3,8 2,6
Olaszország 5 3 2
Spanyolország 4 2,3 1,8
Görögország 3 2 1,1
Portugália 2,5 1,7 1,4

In the year Hungary joined the European Union, GDP per capita in Austria was only 3 times higher than in Hungary; in Germany, France and Belgium the same number was slightly more than 3, while in the Netherlands it was 4. The Spanish GDP per capita was only 2.3 times higher than the Hungarian, down from the previous 4, and in Greece it was only twice as high. 

Countries that joined the EU together

As Hungary joined the EU together with the Visegrád and Baltic states, it is reasonable to compare those as well as the southern countries that joined a little later. The figure was 0.3 for Bulgaria and 0.35 for Romania, showing that the two Balkan countries were lagging far behind Hungary, reaching only a third of the Hungarian GDP per capita. Slovakia, Poland, Lithuania and Latvia were also significantly weaker (the figures are shown in the table at the end of the article), and even Estonia’s output, which has since turned into an economic miracle, was only 80 percent of the Hungarian level, similarly to Croatia. Only the Czech Republic was significantly ahead with its 30 percent higher GDP per capita than Hungary’s.

The second 15 years 

If we look at the current situation, we can see that Hungary’s convergence has slowed down in relation to some countries, whereas it has remained dynamic in relation to others. On the one hand, the number for Austria remained 3, i.e. it has been progressing at the same pace as we have, and Germany’s advantage has become just slightly smaller (it should not be forgotten that the eastern half of Germany was also a convergence region). On the other hand, the number for France has fallen from 3.4 to 2.5, while for the Netherlands it has dropped from 4 to 3. 

The situation in relation to the Mediterranean countries is even more spectacular: 

Italy's current GDP per capita is only twice as much as that of Hungary while it was 3 times as high in 2004, Spain's 1.8 times, Portugal's 1.4 times and Greece's almost the same at 1.1 times.

Situation in our region

As far as the countries of our region are concerned, they have been developing faster: within the Visegrád region, the Czech Republic's advantage has increased slightly, Poland has got very close, and Slovakia has surpassed us. Croatia has remained at the same level, but the Baltic states have managed to do wonders, although the fact that their already small population has decreased considerably also played a role (the rapidly growing GDP in Estonia, Latvia and Lithuania is distributed among 1.3 million, 1.9 million and 2.7 million people, respectively). Bulgaria has come much closer from 30 percent to 60 percent of the Hungarian level, and Romania has grown even more sharply, from 36 percent to 80 percent.

GDP per capita of regional countries compared to Hungary; Hungarian data = 1 Source: Eurostat, Central Statistical office
2004 2020
Csehország 1,30 1,40
Szlovákia 0,80 1,18
Lengyelország 0,67 0,90
Litvánia 0,60 1,18
Lettország 0,70 1,07
Észtország 0,90 1,45
Horvátország 0,90 0,90
Bulgária 0,30 0,60
Románia 0,36 0,80