Granular EU: The steady rise of Eastern European spending power
With the upcoming European Union elections on May 26th, we want to take some time to analyze the spending power of European countries. Using our web tool Market Pro, which allows users to look at any country’s spending forecasts and market power in real time, we will focus on the region that is growing the fastest within the European Union in terms of spending power: Eastern Europe.
Average annual spending power per capital growth of 3% over the next decade
Between 2004 and 2013, the EU added 13 new countries. From the perspective of our analysis, the main characteristic that links these countries together is that their spending power is currently the lowest among EU members, ranging from $10,999 per capita in Bulgaria to $16,468 in Slovenia (in 2011 PPP).
While the annual spending power of these Eastern European countries is among the lowest in the EU, their spending power growth rate is expected to be the highest over the next decade fueled by strong wage growth and low unemployment. The growth of this region during the last 30 years has been impressive and is only matched by the Asia-Pacific tigers. Since 1991, the GDP per capita of countries like the Slovak Republic or Poland has increased almost three-fold in constant 2010-USD, according to the World Bank.
According to our data, countries like the Slovak Republic, Estonia, and Latvia are expected to increase their spending power capacity by an average of more than 3% per year over the next decade. This means an accumulated growth of between 38%-47% for each countries’ spending power, among the highest in all of the European Union.
Bulgaria, Romania, and Croatia were the last additions to the EU, the first two joining in 2007 and the last in 2013. Their growth rates are expected to be among the highest in the EU, especially for Bulgaria and Romania, whose spending power per capita will grow an impressive 49% to the year 2031, reaching $16,373 and $19,789 respectively. Croatia is expected to experience more modest but a still high 32% growth. However, it is expected to be the country with the lowest spending power per capita in the EU by the year 2031 ($15,078).
Poland to surpass Italy by 2030
Certain countries are also expected to eventually overtake senior members of the union in spending power. For instance, it is expected that in 2030 Poland’s per capita spending power will surpass Italy’s.
Nowadays, Romania’s spending power is less than half of Germany’s, however, by 2030 this difference will narrow to only two thirds. This trend will reduce the differences between richer and poorer countries that we currently see in Europe, creating a more homogenous bloc in terms of spending power. It will also increase the economic weight of eastern economies within the EU. Currently, the spending power of these economies’ accounts for around 14.8% of the EU total but this number will climb to 16.6% by 2031.
Ireland and Malta are also expected to experience fast growth
Besides the Eastern countries, there are only two countries in the European Union whose spending power is expected to grow more than 40% over the next decade. We are talking about Ireland and Malta.
Since the EU-IMF bailout of 2013, Ireland has shown strong and steady growth. With a current spending power per capita of $19,904, by 2031 Ireland is expected to overtake richer economies such as France, Finland, or Denmark in terms of spending power per capita.
Malta is the second smallest country in the EU by population. The growth of its economy resembles the fast-growing Eastern countries rather than its Mediterranean neighbours. Currently, Malta ranks 13th in the EU in spending power per capita with $19,403. However, it is expected to climb to 4th position by 2031 with $27,668.
In terms of spending power, the next decade looks to be one of change for the EU.