Growing and slowing down: Central Eastern European economies and the EU funds
Since their accession to the European Union the Visegrad four and Baltic countries' economies have been growing significantly, mainly thanks to EU funds. But there are differences among the countries.

Photo: gildas_f/Flickr
Growing and slowing down: Central Eastern European economies and the EU funds
Since their accession to the European Union the Visegrad four and Baltic countries’ economies have been growing significantly, mainly thanks to EU funds. But there are differences among the countries.
Photo: gildas_f/Flickr
We can analyze the performance of the Hungarian economy and the growth of GDP from several perspectives. We can compare it with the western European countries, which is an ambitious approach, since those who have started from a much higher level have been able to record much higher profits even with a lower growth rate, and there is still a large gap between the nominal values of GDPs. We can look at the data on their own, which is also misleading, because even if the numbers show that the economy has gown in recent years – and here comes the third point – the growth is not so obvious if we take into account our regional competitors. In the big enlargement wave of the EU in 2004, ten member states joined the EU: the four Visegrad countries, the three Baltic states, Cyprus, Malta and Slovenia. In 2007 Romania and Bulgaria and then in 2013 Croatia.
Let’s look at the numbers. The European Commission’s assessment includes GDP growth numbers for all Eu countries (or prospective member states) from 2000 onward. For the first 15 years, they provide five-year averages, and from 2015 we can see the annual growth data. At a first glance, Hungary’s data has been remarkably weak between 2004 and 2014. In the first five years, an average annual increase of 0.5% and 1.4% was achieved. Some data from other countries for the same period: Poland 4.7 and 3, Slovakia 5.1 and 2.7, Romania 4.7 and 1.4, Lithuania 2.4 and 3.7. This difference will also be reflected later in the data on the total GDP growth.
There are a number of reasons why the economy did not want to grow in the first ten years since Hungary’s accession to the EU. The state authorities’ irresponsibility is part of the reason, as the population was indebted in risky – later tragic – foreign currency loans, the Medgyessy government increased wages without an economic foundation for it: the budget went out of control due to over consumption and the fact that the Gyurcsány government has pushed the growth hand brake down from 2006 to stabilize the economic situation. Receiving EU funds has started very slowly, in fact, EU funds for the 2007-2013 period only started to arrive after 2009. Later, all of this has been upset by the economic crisis, which has pushed back all economies. However, it only reinforced Hungary lagging behind in the economy.
We asked Zsolt Becsey, a university professor who was a Fidesz representative between 2004 and 2009 in the Economic Committee of the European Parliament, and also worked as Secretary of State for Foreign Economy, to comment on the figures. According to Becsey, it can be seen that for the new member states, convergence was more spectacular in the first half of this period than in the second, except for Hungary, where convergence had been lagging behind. At the same time, the post-crisis slowdown in real convergence applies to the EU countries which have joined the euro area, as well as to those who have not. From this point of view, the eurozone has not shown significant advantages for convergence, but is not the same thing in terms of the security of the financial system, or with regards to price and wage convergence. The expert also drew our attention to the fact that Hungary evaluated its national currency continuously and perhaps to the greatest extent in the region, to reduce wages calculated in euro. There were competitiveness reasons for this, but the Czechs, though they had not joined the euro area, did not need this measure.
Looking at the GDP growth figures after 2015 broken down by year Hungary’s performance is improving, but on average it is not better than its competitors’. The same figures, or even better ones, are produced by Czechs, Slovenians, Poles, Slovaks, and we can mention Romania’s 2018 GDP growth of 7 percent or Malta’s more than 10 percent in 2015. With regards to this, Zsolt Becsey pointed out that in countries such as the Baltic ones, huge sums of money were not invested in unsustainable infrastructure, sports halls and huge swimming pools, railway, as it happened in Hungary. The investments were primarily made instead on road infrastructure, and in education, in business development, there growth is more impressive. In fact, rail investment at this stage in Hungary did not lead to an increase in traffic, the system’s deterioration was prevented, but it does not help convergence for another 10 years, Becsey said.