How did the Romanian economy outperform the Hungarian one?
The macroeconomic data published the other day caused a bit of a shock across the nation. According to the data, in terms of gross national product per capita, Romania has now unquestionably surpassed Hungary.
Romanian GDP per capita preceded the Hungarian one
As we have written earlier, Romania caught up with the Hungarian GDP per capita. Hungary’s GDP per capita in 2022 was 77 percent of the EU average at purchasing power parity (PPP), according to a preliminary release by Eurostat. And while Romania’s GDP per capita was 74.1 percent of the EU average in 2021, in 2022, it rose to 77 percent. This puts Romania, Portugal and Hungary in the 8th place in the overall list. Now it seems like the Romanian economy is getting stronger and stronger, preceding the Hungarian one in terms of gross national product per capita.
How could the Romanian economy catch up?
During the Ceaușescu era, the Romanian economy was in terrible shape. A regime similar to the GDR of the time was formed over the course of a few years. In contrast to the Hungarian and Yugoslav eras, which on the surface appear spectacularly Western, the level of economic development was lagging behind compared to the virulent visual technical showcase in the big cities and in the locations frequented by tourists. The retrograde changes perceptible at the level of cultural and nationality politics quickly spread to the economic system as well, writes piacesprofit.hu. The previously export-focused economic structure has become import-oriented. Self-sufficiency has become more and more central in global economic planning.
The Romanian revolution of 1989 can even be seen as a hunger riot, which was a result of the massive impoverishment prompted by the government’s system of instruments. After that, Romania began its independent life as a moderately developed industrial country with virtually no foreign currency public debt. During the decades of Kádárism, Hungary accumulated one of the world’s highest levels of public debt per capita, while Romania practically repaid its foreign currency debts.
The level of debt ratio as a key factor
The rate of catch-up in Romania can be attributed mainly to the blatantly moderate level of debt ratio. Especially in addition to the inflow of working capital that has picked up since the end of the 1990s. Meanwhile, Hungary reproduces a series of new and new debt crises, so since the 1970s, the best of its public resources have been consumed by its own debt service. In accordance with the above, the main explanation for the Romanian catch-up dynamics is to be found in the low debt ratio, the level of which, even during the COVID crisis, did not exceed the 50 percent level measured as a proportion of the national gross product.
As we wrote a few days ago, there are new anti-Hungarian voices in Romania. Now they are demanding the demolition of the new Kölcsey statue, details HERE.
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