Do really even Slovaks live better than Hungarians?

A Hungarian news portal calculated whether news about Slovak purchasing power per capita being higher than the Hungarian is true or not. After analysing available data, they reached unexpected conclusions.

Slovakia produced a commanding economic development

According to some Hungarian think tanks like GKI Economic Research Co., Hungary can reach 1/3rd or half of Austria’s economy level by 2030. However, many say at present that even Slovakia is ahead of us at the moment. Others say that Romania is starting to overtake us at least in respect of the minimum wages. Penzcentrum.hu tried to compare how much Hungarians and Slovaks take home each month, whether there are regional differences in this respect and tried to analyse the reasons.

The average Slovak gross wage in 2018 was 1035 EUR while the net amount reached 788 EUR. At the same time,

Hungarian average net income was 677.5 EUR (215 thousand HUF)

which means that the Slovaks get a bit more than Hungarians. However, net wages in themselves do not represent the real economic situation of the people since the general price level has an important impact on that.

Compared to the EU (100 pc), the Hungarian price level was 59.4 pc while the Slovakian was 65.4 pc in 2017. Consequently, Slovakia is a bit more expensive than Hungary. Therefore, the Hungarian average net income in purchasing power parities (PPP) is 1144 EUR while the Slovak is 1204 EUR. So even though Slovakia is a bit more expensive country, the Slovak income is still worth more than the Hungarian.

In fact,

Slovakia’s economic development was much behind Hungary’s

at the beginning of the 1990s. This situation did not change under PM Vladimir Meciar; however, something happened in the mid-2000s. For example, the Dzurinda-administration introduced significant market reforms and liberalised the country’s economy. As a result, the Slovak economic growth reached 10.7 pc in 2007. Of course, liberalisation had negative side-effects, as well. For example, in Eastern-Slovakia where many lost their jobs and suffered hard from the cutbacks in social aids the situation resembled a civil war, and even the military had to march in.

Both economies are very dependent on foreign capital

If we take into consideration how much an average Slovak produces a year, we find that

in 2017 the GDP per capita was 17,605 dollars in Slovakia and 14,225 in Hungary.

And according to penzcentrum.hu, this is the most crucial factor of any country’s economic development.

Slovakia has one significant advantage compared to Hungary, the proximity of Austria. This means that companies in Vienna can easily move their production to Bratislava (Pozsony) and are able to pay less for their employees there. Moreover, in Bratislava, the city council allows building skyscrapers while the same is banned in Budapest. In Slovakia, the administration is more straightforward, and taxes are lower than in Hungary which is good for the employers and the employees, as well. Finally, both economies are very dependent on foreign car factories, and regional differences are significant.

In Slovakia, there is no region where people get less than 630 EUR per month while in Hungary, in Szabolcs-Szatmár-Bereg county the average income is just 434 EUR. Meanwhile, employees get 220 EUR more in Bratislava than in Budapest. Consequently, in Slovakia, wage inequalities are much lower than in Hungary.

Finally, it can be stated that Slovakia is in a much better shape today than Hungary; however, both economies are very dependent on foreign capital which is a risk in the long run.

Source: penzcentrum.hu