Race against time: Eastern Europe growing old before rich?

With the labor force soon starting to shrink dramatically because of the lagged effect of the collapse of birth rates in the early 1990s, Stefan Karlsson believes that most, if not all, Eastern European countries will grow old before they grow rich.

Many pundits have argued that China could "grow old before it grows rich". Though the extent of ageing of China's population is exaggerated (despite it's "one child" policy, its actual birth rate has been higher than in Eastern Europe-or Taiwan, South Korea or Japan) that may be true, though the size of its population still means that it will likely become the world's biggest economy.

What seems clear is that Eastern Europe is growing old before it grows rich. In the last post I noted that per capita GDP in Estonia was only €12,000, compared to €32,000 in Germany. But what about the other Eastern European countries? I limited myself to Eastern European countries that are members of the EU simply because the convenient and reliable data source known as Eurostat that I've used here only included them. However, non-EU members like Ukraine (see my discussion of Ukraine's poverty here), Moldova, Serbia or Albania are generally even poorer than those that are part of the EU so including them would only have further supported the conclusion of this post.

I used the 2011 GDP numbers provided by Eurostat and divided them with the latest population figures. For Slovenia, Slovakia and Estonia no exchange rate conversion was needed because they have the euro as currency. For Latvia, Lithuania and Bulgaria I needed to convert them according to the fixed exchange rate that their currencies have to the euro, but that was relatively unproblematic since the exchange rates have been the same all the time. For Czechia, Hungary, Poland and Romania it was more problematic since their currencies have a floating exchange rate, meaning the results will differ somewhat depending on what date you use for the exchange rate. For simplicity I simply used the latest exchange rate for them.

Here then is the results, the 2011 per capita GDP for the 10 ex-communist Eastern European members of the EU:

1) Slovenia €17,400
2) Czechia  €14,000
3) Slovakia €12,700
4) Estonia   €12,000
5) Latvia  €10,000
6) Hungary € 9,800
7) Lithuania € 9,600
8) Poland €9,500
9) Romania €6,800
10) Bulgaria €5,200

As you can see, all but three, namely Slovenia and the two countries that used to be part of Czechoslovakia are even poorer than Estonia and even the richest Eastern European country, Slovenia, is far poorer than Germany and most other Western European countries. The only Western European country poorer than Slovenia is Portugal who had a per capita GDP of €16,100 . However, all the other Eastern European countries are even poorer and-most significantly poorer. And everyone is far below the income level of most Western European countries (€30,000 to €40,000).

With the labor force soon starting to shrink dramatically because of the lagged effect of the collapse of birth rates in the early 1990s, it seems safe to say then that most, if not all, Eastern European countries will grow old before they grow rich.