Romania and Hungary are often mentioned together, due to their historical backgrounds that contain some common elements, such as Transylvania, a region that today belongs to Romania but used to be part of Hungary until World War I.
Another aspect is the two countries having their respective capitals whose names are often confused by tourists. (Something both countries are quite fed up with.) When it comes to the economic performance of the region, Romania and Hungary developed almost hand in hand for a very long time. This scheme seems to be changing now.
Even though the productivity of Romania and the Visegrád Four (V4) countries – the four countries of the Visegrád Group (Hungary, Poland, Slovakia and the Czech Republic) – has been dynamically increasing over the past years, the economy of this region has quite a lot of disadvantage to get rid of, to be able to reach the European Union’s average level – writes G7.hu.
In order to measure productivity or the economic efficiency of a country, we use numerous indicators, for instance, Gross Value Added (GVA) which refers to the added value by one employee of the sector.
This approach, due to the differences in prices among these countries mentioned above, will increase, to a certain extent, the already existing gap between Western and Eastern countries.
In 2018, average productivity in EU countries was 60 thousand euros/person, while that of Hungary was only around 25 thousand euros. The productivity of Romania only reached a level of 21 thousand euros.
If we consider V4 countries and Romania and look at the period between 2000 and 2019, the productivity of the non-V4 country used to be the lowest, however, the country is catching up quite nicely to the others in the region, and its disadvantage is starting to disappear.
If we look at the four countries forming their own union, Hungary is lagging behind significantly.
Romania’s low numbers in 2019 were also because in agriculture, for instance, GVA was only 5 thousand euros/worker, while this same value was much higher in Hungary, reaching 26 thousand euros, which is above the EU average.
When it comes to industry, the same goes for all V4 countries, namely that their productivity in the sector does not even reach half of the EU’s average industrial productivity. In Hungary, we are talking about 29 thousand euros/worker while Romania’s 26 thousand euros are not much behind but certainly further from the EU’s average.
However, in crucial sectors such as commerce, logistics, hospitality and the construction sector, Romania has essentially reached the productivity rates of Hungary (19 thousand euros).
Still, both countries are very far away from the EU, that produces a high number of 46 thousand euros/person. If we only consider the construction sector, both countries need to speed up as their added value of 17 thousand euros is the third lowest number among all 27 member states.
In the banking and assurance sector, both countries have a lot of catching up to do to one day reach the EU average of 118 thousand euros/person. In this respect, Romania has already surpassed Hungary and created a minuscule difference of one thousand euros/person. (Romania: 48 thousand euros, Hungary: 47 thousand euros).
When it comes to real estate; professional, scientific, technological and administrative services, Romania is already ahead of Hungary.
Overall, Romania is performing poorly in agriculture, that creates a particular pull-back effect, however, if we do not include this sector, the country is already competing successfully with the V4 countries, including Hungary.