Romania's catch-up to the EU average was dynamic in 2022 with a 2.9pp increase compared to Hungary’s 1.8pp growth.

In a regional comparison, GDP per capita at purchasing power parity stood at 92% of the EU average in Slovenia, 91% in Czechia, and 79% in Poland.

In the last nine years, Hungary has made progress in closing the gap with the EU average but at a slower rate than Romania. The GDP per capita has increased by 8.5pp, while the Romanian economy has shown a much faster convergence rate, slightly above 22pp.

This data confirms that Hungary is losing ground to its peers in CEE. This is rather embarrassing news for Viktor Orban’s radical rightwing government as Romania was long regarded as the poor neighbour and the country’s leaders, including the central bank, have set ambitious or rather unattainable goals of closing the gap to Austria by 2030.

Based on the latest ranking, Hungary was ahead of only five countries in the EU: Latvia, Croatia, Slovakia, Greece and Bulgaria in 2022.

Former central bank governor, Akos Peter Bod, said that GNI is considered a better indicator of living standards than GDP, especially in a country with a high export-to-GDP ratio and strong FDI inflows. The fact that GDP figures overestimates Hungary’s national income is reflected in the data showing consumption per capita. This paints an even bleaker picture as Hungary is ranked second to the bottom after Bulgaria with a consumption level of 70% of the EU average.

The government has taken credit for the robust growth between 2015 and 2019 and double-digit real wage growth, boosted by the inflow of EU funds and the low interest rates. MNB governor Gyorgy Matolcsy called the period between 2010-2020 the most successful in the history of the country. Hungary should strive to reach 100% of the EU average by 2030 and to do this annual growth needs to exceed the EU average by 3.5pp annually, according to MNB’s policy recommendations issued after the 2022 elections.

Even as Romania looks likely suffer a significant economic slowdown to 2.0-2.5% in 2023, its growth will still be above that of most of its peers, helped by EU funds and the good performance of the agriculture sector.

While Hungary is still fighting to access RRF funds and money from the EU’s cohesion funds from the 2021-2027 budget, Romania has no such problems. Akos Peter Bod pointed out that, according to the IMF, the combined use of the seven-year EU budget and the RRF will reach 1.7% of Romania's GDP this year, rising to 2.3% in 2024 and 3% in 2025.