Usually on weekends, I try to switch off from business and look on the brighter things in life. This weekend, some tasty french breakfast delights, a biking tour and a lot of tv-sports (Premier League, Bundesliga, Steaua-Dinamo, the cycling-classic Paris-Roubaix and the two final rounds at the Augusta Masters) was the ‘anti-business’-program.
But by force of habit, I nonetheless checked my inbox on Saturday morning while sipping the first coffee. I almost dropped my cup of delicious brazilian arabica, when I read this headline from money.ro
Economia României a depășit-o pe cea a Cehiei
Romania’s economy overtook the Czech Republic
Wow, that was real news on an empty stomach. How can this be possible? Just 10 days ago, while visiting a client in Vienna who is also doing business in the czech regions of Pilsen, Brno and Prague, I was told that although the Czech economy is not yet up to its potential, the country is generally on the right track and that the budget surplus for the 1st quarter 2016 was the highest in the history of the Czech Republic, mainly because of higher tax revenues.
And – as I just wrote last week on this site – in the latest Mercer-report the Czech capital Prague was named the best place to live in Central and Eastern Europe.
And Romania should be better than the Czechs? I examined the news further and – as suspected – the headline was based on the GDP-figures of Romania (160 billion EUR) and the Czech Republic (155 billion EUR).
Well, the GDP is an important figure for the state of an economy, it’s the monetary value of all final goods and services produced in a country in a year. But if a news-report uses the GDP to compare two different countries, then one has to question the basic economic knowledge of these journalists that in consequence is only misleading the readers.
To use the GDP to compare the economies of two different countries is like a football game, in which one team has 11 players on the pitch and the other plays with 5. In such a situation, 11 Steaua players would probably beat even Barcelona with 5, but obviously the joy of winning the game wouldn’t be so exuberant.
To play a fair game on the economic-pitch, never, I repeat, never consider the GDP to be a useful measurement. Always, I repeat, always use the GDP per capita which takes the difference in population of two countries into consideration. In the economic game Romania vs Czech Republic the real result looks like this:
Population: 20 million
GDP: 160 billion EUR
GDP per capita: 8’000 EUR
Population: 10,5 million
GDP: 155 billion EUR
GDP per capita: 14’760 EUR
That’s a difference of over 80% in favor of the Czech Republic! It requires an awful lot of education, investments and entrepreneurship in Romania to close this gap and decades of substantial economic growth until the headline Economia României a depășit-o pe cea a Cehiei could become really true.
Based on a stable population: to double the GDP per capita from the current 8’000 to 16’000 EUR, the Romanian economy would have to grow by a rate of 3% annually for the next 24 years in a row… but until then, the Czechs are most likely above 20’000 EUR.
And until then, I would advise the journalists in this country to think twice before posting false headlines and misleading readers. Instead recall the one and only commandment of their profession that really matters: ”Get It First, But First Get It Right”.
Romania’s economy is far from overtaking the Czech Republic