Two convergences

In a previous article we showed how long it will take for Russia and Greece to converge in terms or per capita income with Spain, France and Germany. We will present more countries in Eastern and Western Europe. We will not present all of them but it will be relatively easy to find out about all of them. The following table shows per capita income ratios.

Table 1

Ukraine, Serbia, Bulgaria, Slovakia, Greece, Poland, Czech Republic are in columns. Portugal, Spain, Malta, Italy, Britain, France, Finland, Germany, Sweden, Belgium, Austria, Netherlands, Denmark, Switzerland, Norway, Ireland, Luxembourg are in rows. Portugal has 2,87 times higher per capita income than Ukraine. We can see in Greece's column the values that were mentioned in previous article. The ratio with Spain is 1,22, with France 1,49 and with Germany 1,7. The last one is also Western - Eastern Europe's ratio.

We need another table to find out how long it will take for a certain country in Eastern Europe to reach the per capita income of a country in Western Europe.

Table 2

Growth rates are in columns and years in rows. What growth rate does Bulgaria need to reach Spain's current per capita income in 15 years? If we go to Table 1, we find that Spain/Bulgaria ratio is 1,58. If we look at Table 2, a growth rate of approximately 3% is required. Or Bulgaria needs 3% ABOVE Spain's growth rate, to reach in 15 years, its future per capita income.

We can see this in another way. With a growth rate of 4%, when will Slovakia reach Finland's current per capita income? From Table 1, we see that Finland/Slovakia ratio is 1,84. From Table 2 we find that it will take approximately 15 years. If Slovakia wants to reach Finland's future per capita income, it will need 4% growth rate ABOVE Finland's. Not all countries are included in Table 1.

We will supplement it with per capita incomes* for all Western and Eastern European countries. In 2021, per capita income (ppp) for Western European countries' in thousands $ were; Luxembourg 131 Ireland 106 Norway 81 Switzerland 75 Denmark 64 Netherlands 63 Sweden 60 Austria 59 Belgium 58 Germany 58 Finland 54 France 51 Great Britain 50 Malta 49 Italy 46 Spain 40 Portugal 36.

For Eastern Europe the values are; Czech Republic 45 Cyprus 44 Israel 43 Slovenia 43 Estonia 42 Lithuania 42 Poland 37 Hungary 36 Romania 35 Latvia 34 Croatia 33 Slovakia 33 Russia 32 Greece 31 Turkey 30 Bulgaria 27 Montenegro 23 Serbia 21 Belarus 21 North Macedonia 18 Georgia 17 Bosnia 17 Albania 15 Moldova 15 Armenia 15 Ukraine 14.

Cyprus is not in Table 1 but its income is close to Czech Republic's. So if we look at Czech Republics row, it will be approximately the same as Cyprus's. How long will it take Cyprus to reach Sweden's future per capita income? The ratio from Czech Republic's column is 1,32. Cyprus will need approximately 30 years with 1% growth rate ABOVE Sweden's. With 2% above it will need approximately 15 years and with 3% above approximately 10 years.

Western/Eastern Europe ratio is 1,7 with the original composition for Eastern Europe's Group 4. From Table 2 we can see how long it will take for the whole group overall to reach Western Europe's per capita income. With 2% ABOVE, it will take 25 - 30 years, with 3% ABOVE, it will take 15 - 20 years and with 4% ABOVE it will take 10 - 15 years.

Each country will have a different annual growth rate. Convergence with Western Europe in terms of per capita income is one of the main goals in Eastern Europe's economic plan. It is not just that, it is THE No 1 GOAL. There is an optional convergence as well. Eastern Europe's group will decide on that, after it is formed. Most likely they will approve it. The second and optional convergence is among Group's 4 member countries.

The same principle applies as with Western - Eastern Europe convergence. Countries that have lower per capita income will need higher growth rates in order to converge with countries that are higher on the list. Ukraine (14) is the poorest country, Czech Republic (45) is on the top and and Slovakia (33) in the middle. In calcuclating the average, income values were weighted with populations. The average of highest and lowest value is 45 + 14 /2 = 29,5.

Slovakia/Ukraine ratio in terms of per capita income is 33/14 = 2,36. Looking at Table 2, Ukraine will need a growth rate of 3% ABOVE Slovakia's to reach its level in 30 years. Suppose that Slovakia has 3% growth rate. Ukraine will need 3 + 3 = 6%. This is very optimistic and not very likely but not entirely impossible. As long as Ukraine has higher growth rate than Slovakia, it will be getting closer, in terms of per capita income.

Czech Republic/Slovakia ratio is 45/33 = 1,36. With 1% growth rate ABOVE Czech Republic's, Slovakia will need 30 years to reach it in terms of per capita income. Let's say that Czech Republic has 2% annual growth rate. With 1% growth level above Belgium's (if it has 1%), it will reach its per capita income in 30 years. So Slovakia will reach Belgium's future level as well. Ukraine would reach it with 6% growth rate which is not very likely. Nevertheless, it will have come much closer.

*If  ratios are calculated with these, there might be small differences because a more recent set of data was used for the ratios.