Shocking: Romanians now live better than Hungarians? – UPDATE

bucharest hotel continental
Grand Hotel Continental, Bucharest, Romania. Source: Wikimedia Commons/Mihai Petre

Romania has already surpassed Hungary’s GDP, and new statistics indicate a worsening position for Hungary in the region. Factors such as wages, cost of living and inflation levels demonstrate Romania’s superior economic standing, raising significant questions as Hungary struggles to match the development of the other countries in the region.

Differences in wages in Romania and Hungary

According to portfolio.hu, Romania has overtaken Hungary in economic growth. As we previously reported, Eurostat data showed Romania’s GDP per capita surpassing Hungary’s in 2023. However, recent figures reveal that Romania’s consumption levels were also higher, driven by increased wages and faster economic expansion.

While comparing wages across different countries is challenging due to exchange rate fluctuations and pricing disparities, it’s evident that Poland boasts the highest wages in the region, with Romania showing the fastest expansion. Moreover, Romania’s consumption levels appear more stable than Hungary’s. Data suggests that Bulgaria’s consumption could soon reach Hungary’s level, reflecting its rapid development. Hungary’s low wage costs may attract companies seeking cheaper labour over higher education and added value, with the average wage cost standing at 13 euros per hour.

Ákos Péter Bod, the former governor of the Hungarian National Bank, recently authored an article for portfolio.hu, suggesting that Hungarians should abandon the notion of having a superior economy to Romania or other former socialist countries like the Czech Republic or Slovakia, as societal beliefs previously held. He states that Hungary lags behind these countries and its much more developed neighbour, Austria.

Below the region’s average, concerning numbers

Romania Hungary economy flag
Photo: depositphotos.com

Comparing the wages and the consumption of Hungary and Romania, it is clear that Hungary falls far below expectations considering its wage levels, possibly due to increased state intervention in the economy. In the last couple of years, Hungary’s investments have dominated its economy, and the government doesn’t seem to change its plan in this regard for the foreseeable future.

According to economx.hu, Hungary’s relative development declined between 2019 and 2023, despite surpassing Slovakia’s, Romania’s and even Poland’s economies in 2019. However, it failed to keep pace with others in the region, particularly in areas such as green energy and digitalisation, due to being more sensitive to external influences. Since 2022, Hungary’s economic performance has suffered, primarily due to inflation. The country has the highest food, petrol and service prices in the region relative to wages. While exports improved in 2023 due to electric battery production, investment levels decreased and national debt reached a regional high.

Based on these figures, it is clear that Hungary can’t keep up with the region’s average economic development, as the country’s relative expansion and productivity both dropped in recent years. According to the Hungarian National Bank’s latest report, urgent action is needed to bring Hungary up to the region’s standards, necessitating significant reforms.

UPDATE

According to labour market expert and research fellow of the Institute of Economy and Competitiveness of the National University of Public Service, Piroska Szalai, something is missing from the above analysis.

According to her article on Mandiner, Eurostat publishes annual average earnings data for all employees in enterprises with 10 or more employees. The survey excludes employees in agriculture, forestry and fishing, public administration, defence and compulsory social security, non-employees and employees in micro-enterprises with less than 10 employees.

In Hungary, two-fifths of the employed and one-fifth of the total population were covered only.

According to the 2023 figures, Hungary is in 24th place in euro terms for average income childless, followed by Romania, Bulgaria and Croatia. According to Szalai, a more accurate picture is obtained by comparing the data in purchasing power parity. Unfortunately, here only the 2022 data are the most recent available from Eurostat, so the data are calculated using this value. Thus, we can expect some changes in the data.

Currently, this calculation puts Hungary in 22nd place since 2019, with Estonia, Croatia, Bulgaria, Latvia and Slovakia following us in 2023. The order of the Member States changes from year to year. Estonia is now behind us, Romania is ahead. Bulgaria has moved up from penultimate place in 2022, swapping places with Latvia.

According to Szalai, it is important to point out that this 2023 figure is the sequence calculated with the 2022 purchasing power, “which is as accurate as the halfway point in a marathon”.

She adds that one in three Romanians is still poor. “While the rate in Romania has fallen slightly, but is still below the EU average, less than one in five Hungarians are at risk of poverty.”

Between 2010 and 2021, Hungary made the largest improvement among Member States in this area, and also saw the largest reduction in child poverty, as a result of increased employment and the increase in the purchasing power of earnings, not only for employees in large firms but also for all employees, she concluded.

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