The countries of the Visegrad Group opened 2018 with good indicators

KOWALCZYK The Countries of the Visegrad Four jamnik

Several years have passed since the peak of the global financial crisis, and the economic situation of the Visegrad Group countries (V4) seems to be taking a turn for the better, with a perceptible economic recovery.

According to the data gathered by Eurostat, Czech Republic, Hungary, Poland and Slovakia show very good economic indicators when compared to other members of the European Union. Particularly worthy of mention are the unemployment rates in the Czech Republic, Hungary, and Poland, which are exceptionally low, and amongst the lowest in the whole EU. The long-term decline in unemployment is accompanied by a fairly high GDP growth (if compared with the rest of the European Union).

By almost all major macroeconomic accounts the countries of the V4 enjoy better indicators than the EU average. However, it is worth emphasizing that, by looking into the statistics, the general economic situation in the EU appears to be improving.

It is worth remembering that the V4 countries have become a destination for many foreign workers, mostly from Ukraine and other former republics of the Soviet Union, who can relatively easily find jobs in Poland or the Czech Republic.

Unemployment

Almost all V4 countries have an exceptionally low unemployment rate. Whereas the average in the EU was estimated by Eurostat to be at 7.3 per cent in January 2018, in the Czech Republic it amounted only to 2.4 per cent, which is by far the best result in the EU. It makes the Czech Republic an unquestionable leader. The second country in the ranking is Malta (3.5 per cent), the third Germany (3.6 per cent), while Hungary (3.8 per cent) is the fourth.

Poland can also boast an unemployment rate lower than five per cent. In January 2018, it was estimated at 4.5 per cent. Amongst other member states of the EU this indicator is lower than five per cent in only three countries: the Netherlands, the United Kingdom, and Romania. Meanwhile, Slovakia has the highest unemployment rate among the V4 countries. In January, it amounted to 7.5 per cent. Perhaps unsurprisingly, the highest unemployment rate in the EU is that of Greece (20.9 per cent). The unemployment rate in all V4 countries has dropped when compared y/y. In Hungary, in the years 2010-2013, the unemployment rate remained above 11 per cent each year, and therefore the country saw a significant reduction since 2013, which can be considered a success. However, most of Central and Southeast European member states of the EU have a lower unemployment rate than the EU average. The exceptions are Croatia (9.8 per cent), Latvia (8.3 per cent), and the earlier mentioned Slovakia. The same indicator as the EU average is that of Lithuania (7.3 per cent).

Real GDP growth

Amongst the member states of the EU all V4 countries have a relatively sizable real GDP growth rate. In the previous year, it amounted to 4.6 per cent in Poland, 4.3 per cent in the Czech Republic, 4.0 per cent in Hungary, and 3.4 per cent in Slovakia. Among the EU states, higher GDP growth in 2017 was only in Ireland (7.8 per cent), Romania (7.0 per cent), Malta (6.6 per cent), Slovenia (5.0 per cent), and Estonia (4.9 per cent). General global prosperity, increase in consumption, growing exports, and greater productivity of labor stimulate relatively the high real GDP growth rate.

Average Monthly Net Salaries

Meanwhile, despite the very good indicators mentioned earlier, there is still a wide gap between earnings in the Central and Southeast Europe and the countries of Western Europe. Among countries of the region, the highest average monthly net salary is in Slovenia (EUR1,034), followed by Estonia (EUR954), and the Czech Republic (EUR919), which is the best result amongst members of the Visegrad Group. The same indicator in Slovakia amounts to EUR783, whereas in Poland it is EUR776. Poland, however, enjoys significantly lower costs of living than all the other countries mentioned above, including Slovakia and Czech Republic. At the same time, Hungary has perceptibly the lowest average monthly net salary among the V4 countries. According to the Numbeo.com website, it is EUR569. Among the member states of the EU only two have lower average monthly net salary: Romania (EUR562) and Bulgaria (EUR486).

If we compare these data with the countries of the so-called old EU, we can conclude that the Czech Republic, Slovakia, and Poland have higher average monthly net salaries than Greece (EUR690), and for the Czech Republic this indicator is significantly higher than for Portugal (EUR800). Simultaneously, there is still a very significant gap between the V4 states and the countries of the old EU. Average monthly net salary in Spain amounts to EUR1,297, while in Italy it is EUR1,535. The difference in comparison with such countries as the United Kingdom, the Netherlands, Sweden, or Denmark is even bigger. However, we ought to bear in mind the high costs of living in those countries.

Costs of Living and Local Purchasing Power

Poland’s  cost of living index is the lowest (45.20) and is lower than in such countries as Zimbabwe, Ethiopia, Guatemala, Zambia, or Cambodia, while at the same time Poland has by far a better local purchasing power index. Relatively low cost of living index is in Hungary (48.60), although it should still be born in mind that salaries in Hungary are amongst the lowest ones in the entire European Union. The highest cost of living index among the V4 is in Slovakia (50.41), whereas in the Czech Republic it is 50.09. Slovakia is the only country in the V4 that uses the EUR as currency. According to Slovakian eurosceptics, this is the reason why Slovakia has visibly higher prices, and therefore higher costs of living, than Poland or the Czech Republic.

With the highest salaries in the V4, it is of no surprise that it is the Czech Republic that has the highest local purchasing power index (76.35), whereas the second lowest costs of living (including groceries) are those in Poland (74.42). These two countries have a better local purchasing power index than such countries as Greece (53.80), Portugal (61.97), or Malta (66.24). The same indicator for Slovakia amounts to 67.29, whereas for Hungary it is 50.62.

All V4 countries seem to be doing well, although Hungary deserves a special mention. The Hungarian government is more and more frequently lauded for its economic reforms and for overcoming the massive economic crisis, the influence of which was still well visible only several years before. On the other hand, what should be explicitly mentioned, is that the living standards in Hungary seem still relatively low (especially if compared to other countries of the V4) and are now actually on par with those of Romania, which Hungary outdistanced by far in that respect about a decade ago. At the same time, the most important goal for Hungary would be to encourage citizens who emigrated to return to their home country, especially now, when the shortage of workers is increasingly noticeable. This is also a challenge faced by Poland and Slovakia.

Michał Kowalczyk is a PhD student at the History and Social Science Department of the Cardinal Stefan Wyszyński University in Warsaw. He specializes in Hungarian and Central European politics.

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