In 2012, Bulgaria was the country with the lowest
level of GDP per capita among all EU Member States, at less than 50 per cent of
the EU average. Austria was 31 per cent above that average; only Luxembourg
recorded a higher level of GDP per capita. Levels of AIC were somewhat more
homogeneous, but still showed substantial differences across EU. The highest
price level among the EU Member States was observed in Denmark at 45 per cent
above the EU-27 average.
Relative volumes of GDP per capita
Countries’ volume indices of GDP per capita are
shown in the left-hand part of Table 1 (per-capita volume indices are explained
in Data sources and availability).
The dispersion in GDP per capita across the EU
Member States is quite remarkable. Luxembourg has by far the highest GDP per
capita among all the 37 countries included in this analysis, being more than
two and a half times above the EU-27 average, and 6 times higher than Bulgaria,
which is the poorest EU Member State as measured by this indicator. One
particular feature of Luxembourg's economy which to some extent explains the
country's very high GDP per capita is the fact that a large number of foreign
residents are employed in the country and thus contribute to its GDP, while at
the same time they are not included in the resident population.
Austria, Ireland, the Netherlands and Sweden come
out at around 30 per cent above the EU-27 average. However, the EFTA Member
States Norway and Switzerland have a higher level of GDP per capita.
EU Member States with a GDP per capita of between
15 and 25 per cent above the EU-27 average are Denmark, Germany, Belgium and
Finland. EFTA Member State Iceland, the United Kingdom and France show a GDP
per capita level of around 10 per cent above the EU-27 average.
Italy and Spain are at a GDP per capita level just
below the EU-27 average. Cyprus is around 10 per cent below the average, while
Malta, Slovenia, the Czech Republic, Slovakia, Greece and Portugal are between
15 and 25 per cent lower. Lithuania, Estonia, Poland, Hungary, Latvia and
acceding state Croatia are between 30 and 40 per cent below the EU-27 average.
Candidate country Turkey has a higher level of GDP
per capita than EU Member States Romania and Bulgaria, at around more than half
the EU-27 average. The other candidate countries – Montenegro, the former
Yugoslav Republic of Macedonia and Serbia - are about 60 per cent or more below
the EU-27 average. Finally, two potential candidate countries - Albania and
Bosnia and Herzegovina - have GDP per capita of 70 per cent below the EU-27
average.
Relative
volumes of consumption per capita
While GDP per capita is mainly an indicator of the
level of economic activity, Actual Individual Consumption (AIC) per capita is
an alternative indicator better adapted to describe the material welfare
situation of households.
Actual individual consumption consists of goods and
services actually consumed by individuals, irrespective of whether these goods
and services are purchased and paid for by households, by government, or by
non-profit institutions. In international volume comparisons, AIC is often seen
as the preferable measure, since it is not influenced by the fact that the
organisation of certain important services consumed by households, like health
and education services, differs a lot across countries.
Countries’ volume indices of AIC per capita can be
found in the right-hand part of Table 1.
Generally, levels of AIC per capita are more
homogeneous than GDP but still there are substantial differences across the EU
Member States. To illustrate this, in 2012, fifteen countries are clustered in
the range between 80 and 120 per cent of the EU-27 average, while the levels of
GDP per capita for those same countries vary between 75 and 131 per cent.
Luxembourg is the country with the highest level of
AIC per capita in the EU, 41 per cent above the average of the EU-27. However,
while Luxembourg can be said to belong to "a division of its own" in
terms of GDP, this is less so for AIC. One reason for this is that cross-border
workers contribute to GDP in Luxembourg while their consumption expenditure is
recorded in the national accounts of the country of their residence.
The EU Member State with the second highest AIC per
capita is Germany at 21 per cent above the average, around the same as its GDP
per capita. Ireland's AIC per capita is marginally below the average EU-27
level, while GDP per capita is 29 per cent higher than the average.
Price levels in Europe
The price level adjustment factors used to derive
the volume indices in Table 1 can also be applied in an analysis of countries'
price levels. Table 2 shows countries' price level indices to the right, with
the EU-27 average at 100, for AIC only. It also shows the exchange rates
applied in the calculation of the price level indices. In the following, only
the price level indices of AIC will be discussed, since this is closer to the
concept of price levels that most people are familiar with than a price level
indicator based on GDP.
Denmark has the highest price level among the EU
Member States, 45 per cent above the EU-27 average. However, EFTA Member States
Norway and Switzerland have higher price levels which in 2012 exceeded the
overall EU-27 level by more than 60 per cent. Other countries with price levels
more than 20 per cent higher than the EU-27 average are Luxembourg, Sweden and
Finland. Ireland, the EFTA Member State Iceland, Belgium, France and the
Netherlands all have price levels between 10 and 20 per cent above the average.
Austria, the United Kingdom, Italy and Germany have price levels of between 0
and 10 per cent above the EU-27 average.
Spain, Cyprus and Greece have price levels of
around 10 per cent below the EU-27 average, followed by Slovenia and Portugal
being at the same level of around 15 per cent below the EU-27 average.
At the lower end of the table, we find several
countries with price levels between 25 and 50 per cent below the EU average:
Malta, Estonia, the Czech Republic, Latvia and the acceding state Croatia. Also
Slovakia, Lithuania, Turkey, Hungary, Poland, Bosnia and Herzegovina,
Montenegro and Romania fall within this range.
The lowest price levels – half the EU average and
below – are found in Serbia, Bulgaria, Albania and in the former Yugoslav
Republic of Macedonia.
Exchange rates are crucial in determining price
level indices, and exchange rate movements consequently often have a big impact
on the development of price levels over time. In fact, several of the major
price level changes observed between 2009 and 2012 can be at least partly
explained by fluctuations of country's currencies against the euro.
In 2012, the national currencies of the United
Kingdom and Norway appreciated significantly against euro, whilst the most
prominent depreciations were observed in Serbia and Romania.
The last three rows in Table 2 show the
coefficients of variation of the price levels for three groups of countries:
the euro area (EA-17), the 27 EU Member States, and the entire group of 37
countries. A time series of these coefficients can be interpreted as a
rudimentary price convergence indicator.
These figures tell us that first, and
unsurprisingly, the price dispersion is much less pronounced in the euro area
than in the EU as a whole and in the 37-country group, which can be partially
impacted by the volatility of exchange rates. Second, while price levels are
marginally converging within the euro area, this seems not to be the case in
the EU as a whole, or in the complete group of countries.
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