Hungary falls behind Austria, competes with Bulgaria to avoid last place

In 2010, Hungary was 46 percentage points more developed than Bulgaria, the poorest EU country. By now, the Balkan country has made up at least half, and by some estimates two-thirds, of their deficit. In 2023, the Hungarian economy contracted, while Bulgaria’s GDP continued to grow. Although the ministers of Fidesz have been promising for years that Hungary will catch up with Austria in terms of development, this will not happen anytime soon.

Bulgaria keeps reducing its gap with Hungary

Since 2010, Hungary’s economic advantage over Bulgaria has decreased significantly, and Bulgaria has been steadily reducing its gap with Hungary despite its political instability, 24.hu reports. When Fidesz came to power in 2010, Hungary’s economic development was significantly higher than that of Bulgaria, then the poorest member of the European Union. The gap was 46 percentage points. Since then, Bulgaria has made a lot of progress – Hungary less so.

Although the oft-voiced goal is to catch up with Austria, it seems that our main competition is not Austria, but Bulgaria, with whom we are competing to avoid the last places, 24.hu writes.

How did Bulgaria make such a major progress?

Bulgaria has managed to improve its economic situation despite political instability. According to Péter Krasztev, associate professor at the Budapest Business University (BGE), this may be because the frequently changing Bulgarian governments have not been able to influence the economy to the same extent as in Hungary. Bulgarian political forces have been able to unite around their commitment to Europe, which has contributed to the country’s European catch-up.

Bulgaria has functioned better since it did not have a stable government,

says Krasztev.

Hungary’s lead is decreasing – Bulgaria plans to adopt the euro

The analysis, based on World Bank and Eurostat data, also shows that although Hungary is still more advanced than Bulgaria, our lead is steadily declining. Hungary’s GDP per capita advantage over Bulgaria was still significant in 2010, but by 2022 this advantage had shrunk significantly.

In addition to its fiscal discipline and low debt levels, Bulgaria plans to adopt the euro, which could further strengthen its economy. In contrast, Hungary’s budget deficit and higher level of public debt are a cause for concern. According to the latest data, Bulgaria’s economy continued to grow steadily in 2023, while Hungary is in recession. This could suggest that Bulgaria is further reducing its gap with Hungary.

Even Romania shows growth – where is Hungary?

Infrastructure improvements and labour market changes put Bulgaria in a favourable position for economic growth. At the same time, Romania has also shown impressive growth in recent years, suggesting that dynamic changes are underway in several countries in Central and Eastern Europe.

In conclusion, although Hungary still has an advantage over Bulgaria in some economic indicators, this advantage is steadily decreasing. On the basis of current trends, it would be important for both countries to implement further reforms and introduce structural changes in order to improve their economic performance and competitiveness within Europe.

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