This is how Hungary fares by European standards - Can the government reach its 2030 goal?

The European "heat map" of GDP per capita looks like this:

As you can see, the region is still lagging behind Western European countries, but has made significant progress in catching up with Southern Europe, which has just emerged from a decade of failure. GDP per capita in Greece and Portugal has now fallen to the range typical of our region.

By 2021 (confirming preliminary data), the Hungarian development indicator has exceeded that of Portugal. This may have been due to the coronavirus crisis, which hit tourism extremely hard, accelerating the convergence of the two economies. This has pushed the second southern country behind Hungary in the development ranking, after Greece, which fell behind in the middle of the last decade.

If we look at Hungary's development in relation to its closer region rather than the southern periphery, we no longer see any improvement. The graph below shows that Hungary's GDP per capita is in the middle of the regional range, where it fell around 2010.

Two Baltic countries (Estonia and Lithuania) are ranked higher, and so are the Czech Republic and Slovenia. For a decade, the Polish and Hungarian economies have been moving neck and neck, and now the former is ahead by a hair. Slovakia's economy is slowly showing a very marked divergence, and now only Bulgaria is behind it in the region. Slovakia's GDP per capita was trumped by that of Romania in 2020, and by that of Croatia last year.

Real GDP per capita
The indicator is calculated as the ratio of real GDP to the average population of a specific year. GDP measures the value of total final output of goods and services produced by an economy within a certain period of time. It includes goods and services that have markets (or which could have markets) and products which are produced by general government and non-profit institutions. It is a measure of economic activity and is also used as a proxy for the development in a country’s material living standards. However, it is a limited measure of economic welfare. For example, neither does GDP include most unpaid household work nor does GDP take account of negative effects of economic activity, like environmental degradation.

If we take a look at the progress countries in the region have achieved in convergence over the past more than one and two decades, we get confirmation that Hungary's performance in this respect was enough for the mid-range of the rankings. The Baltic States and Romania have shown the fastest development since 2010 and also since 2000.

Based on this, we'll find the Hungarian government's convergence plan for the next eight years in a pretty interesting context. The country could reach the average development level of the European Union by 2030 only if it stepped up the speed of its convergence, as at that the current rate it would remain well below the 90% mark.

Not to mention that there are three factors working against Hungary. Firstly, as development is boosted, the convergence momentum typically peters out. Secondly, The driving force of employment growth, which has been the key engine as of late, could decline markedly. Thirdly, the rapid development led to the exhaustion of the country's balance buffers.

So even if the above goal is reached, it can be done two ways. Either the development level of the entire region is raised to the Western level, or Hungary's convergence path takes a sharp turn upward, leaving behind its regional peers.

Cover photo: Getty Images