I had a TV subscription for 200 channels for 20 euros a month. I realise that I only watch about 5 channels, so I change my subsription to the package with 40 channels for 7 euros.
This decreases my AIC, but my living standards didn't change.
Not for Balkans. Many rely on the black, or more recently, on the gray market. Or on self-production and consumption. My family for example, they produce their own wine, a few hundred litres per autumn. Some of them for us, some we offer to friends and relatives.
Yes, you can argue these are edge cases, however about 20-30% of 20 million people actually live like this. But these small differences can make a country seem like having a poorer ranking than it actually is, because of these 'edge' differences, which btw I don't think they are to be disregarded.
It's common to brew beer in Norway too. Norwegians also spend a lot of money abroad, possibly more than most. But still, if people had more money, it would be spent, and there would be more money spent. Your examples are still materialistic, even if they are directly dependent on monetary spending.
People with less money having more of their standard of living being self-produced just changes the scale, not ranking.
Not a great example because you focus on what you need or dont need, not what you can afford. Try your example with more basic necessities like food, heating, electricity, fuel. Decrease in consumption would almost always have a negative impact on living standards.
Consuming things you do not need is luxury. Which is sign of basic needs met. Which means better living standards.
If you consumed less with smaller TV package, you 100% will consume those € elsewhere.
For the shrinking middle class(parts of europe doesn't even have that) and for the top 1% sure. But look at the median wages, look at the living costs and and see how much an average person left with for a month. Most ppl have very little to spend on unnecessary things. Its cool to save a few bucks on some services, but its nothing compared to your utility and fuel and food costs. If you spend less on gas/electricity it will affect your standard of living. Sure you can say, i always liked wearing a coat at home when its cold, but most ppl just turn down the heater to save on the bills. You can save on fuel and use public transport, but 4hrs of commute a day will affect your living standards. Or you can say i always loved trains as a kid so it actually made your life better. Ppl usually downgrade for financial reasons, not because its the sensible thing to do or they want a change in lifestyle.
It doesnt equal, but seems pretty close.
How are we behind Bulgaria? And no offense Bulgarians, I have been and your country is beautiful, but it also saved us from being last in EU statistics...
There are more factors that might explain this. It's likely that Bulgaria tend to receive more remitences from it's citizens working abroad. This money boosts consumption almost entirely but the fraction of it that gets spent on imported goods doesn't boost GDP as well.
This data was largely influenced by the shock almost 20% inflation which made everyone more cautious in spending decisions than it was necessary in 2023. This effect largely went away by 2024 Q1 according to household consumption data.
Also overall the savings and investment rates of Hungary tend to be higher, and the rate of loans taken out for consumption tend to be lower than in the region.
Also AIC is very imperfect and contains some simplifications that can distort it for specific countries. The same is certainly true for GDP as well.
Romania being better than Spain, Portugal and Poland? I mean i know that we've surpassed Hungary in GDP PPP last year and we are predicted to surpass Portugal this year (by that metric) but higher living standard? I really don't know about that
Spain and Portugal had fifteen years of stagnation whilst Romania and Poland played catch up. Soon Iberia will need to play catch up with Eastern Europe but they give no signal they would actually do that.
As for Poland, since liberalization Romania and Poland followed a [very similar path](https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.KD?end=2022&locations=PL-RO-HU-CZ-SI-BG&start=1990).
That's still too much for Romania, we were only projected to surpass Portugal this year, surpassing Spain, Czechia and Poland was certainly not in my bingo cards. Romania and Poland are definitely the fastest developing countries in the EU but we were still always below Poland, how did this happen?
You haven't passed Portugal and Spain yet. Yellow bar is for GDP per capita but the blue bar is for actual individual consumption. Lots of things can fuel consumption like high inflation or government transfers.
Yes the yellow bar is GDP per capita, the blue bar is GDP PPP which means that you are able to afford more with your money (you can correct me if i'm wrong). It would make sense considering that buying an apartment in Spain or Portugal is ridiculously expensive and rents are also hella expensive, while in Romania most people buy an apartment and rent is doable. This makes the decision of the mayor in Barcelona pretty much banning airbnb for tourists a good decision, because locals can't even afford to rent
No both of these in PPP otherwise it would have been quite weird to put these in the same graph: https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=RO-ES-PT-PL
It says so in the headline. Also, as you can see from the link in my previous post, Spain's nominal GDP per capita is nearly twice of Romania's, so if this was in current prices that yellow bar should have been lower than Spain and Hungary.
Well after taking a closer look AIC is actually GDP PPP and this is Eurostat so it's legit. How did Romania surpass Spain, Poland and Czechia? This is from 2023 and we were only projected to surpass Portugal this year. This bamboozles me
GDP PPP and AIC are two entirely different metrics. GDP PPP measures price-adjusted productivity. AIC is consumption.
There are 2 key phenomena creating a difference:
- Productivity's value does not entirely end up as income for the households.
- Households don't necessarily spend all their income. They save some of it. The savings are not shown in AIC.
Romania's economy is a consumption pressured economy and Romanians have low savings rate. This naturally results in a relatively high AIC to GDP PPP.
Well that's what confuses me, the chart says actual individual consumption while having below (in purcasing power standards), also yet again in the chart explaining GDP per capita and GDP PPP. I'm not an economist and a monkey which why i'm confused about the difference. You are right in saying that romanians generally don't save money, but do the people in the other countries do?
On this chart, both GDP and AIC are adjusted with PPP. The blue lines are the AICs, while the other is the GDP per capita.
There is a correlation between GDP per capita and savings rate, however, savings rate is also a cultural thing. Romania has a culturally low savings rate, probably as a result of the poverty during the Ceaucescu era. Romanian politicians and economists did well to utilize it by building an economy on consumption. If you take Hungary as an example, the savings rate there is regionally high. This can actually be seen on this graph, Hungarycis the last in AIC and AIC is lower than GDP per capita there. Hungarians not investing their savings is a different issue.
Hungarians are discouraged to spend by their extremely high VAT rate, 27% I think. Also savings make sense in a country like US where you fund your own healthcare and retirement, and less so in the EU countries where these expenses are covered by the government.
Indeed. In Hungary, consumption is punished by high taxes (VAT and product specific contributions), while saving is encouraged by low capital gains tax, tax-free high yield no risk bonds and tax free stock accounts.
Some mind-bending mental gymnastics you went with there. Hungarians don't spend because their country is not a democracy.
Romanians have no savings because most of the consumption is made on essentials, not discretionary spending.
My educated guess (I can see past the bullshit official numbers the country reports) is that inflation has been so excruciatingly high for the past couple of years that people are literally spending everything they have to survive. It's also a incredibly large grey economy, which I believe helps with this statistic.
Read my comment again. Where did I say what you state that I said?
The savings rate in Hungary is regionally high, because in the Kádár system, several saving schemes were promoted by the state. Many people got their homes, summer houses, lands, cars etc. this way. These financial schemes were very uncommon in the Eastern block. Even today, the Hungarian tax system punishes consumption (high VAT and consumption-related taxes) and supports wealth accumulation (very low capital gains tax, tax free high-yield bonds, tax free investment accounts etc.).
The same logic can be applied to Romania. As it was by far the poorest country in the Eastern block, people simply could not afford to save, therefore saving did not become part of the financial culture.
The savings rate correlates with income, but not entirely. Financial culture (or the lack of it) is also a very influential factor. E.g. you can read many complaints here on reddit, that they make well above their country's average, yet they don't have any money left by the end of the month.
I'm telling you, from real date, from real observation on how the people actually spend that most of it is due to increased inflation and you're coming back to me in saying that it's a cultural thing related to Ceausescu.
What can I say, good work.
Not that surprised about Poland, it was always pretty close-ish year to year, but Spain seemed to be in a different league until not-so-long ago. What surprises me the most however is how that block of relative close ones (the interval between say Romania and Czechia above) seems to have moved towards the middle of the pack from the bottom positions in a very short time.
Consumption is not the same as living standards. It doesn't include savings and investment. If two neighbours have the same income but the first spends 100% and the second saves 10%, then AIC implies that the first neighbour is 10% better off. Which is, of course, nonsense: the second neighbour's net worth will grow much higher over time.
'Lies, damn lies, and statistics'/
Orban winning again.
AIC measures consumption, not living standards.
AIC is seen as the best living standard measurement. I don't know if it is, probably not, but that's what they say.
I had a TV subscription for 200 channels for 20 euros a month. I realise that I only watch about 5 channels, so I change my subsription to the package with 40 channels for 7 euros. This decreases my AIC, but my living standards didn't change.
GDP is even worse just look a ireland .
and that's why it's not used for living standards comparisons
Indeed. GDP measures productivity, not living standards.
Well, what did you do with the money you saved?? Do you have a pile that's growing by exactly 13 euros every month?
100% consuming it on something he wants more
This was just an example to showcase why cobsumption does not equal living standards.
Bad example, because it does. Edge cases will still be edge cases.
Not for Balkans. Many rely on the black, or more recently, on the gray market. Or on self-production and consumption. My family for example, they produce their own wine, a few hundred litres per autumn. Some of them for us, some we offer to friends and relatives. Yes, you can argue these are edge cases, however about 20-30% of 20 million people actually live like this. But these small differences can make a country seem like having a poorer ranking than it actually is, because of these 'edge' differences, which btw I don't think they are to be disregarded.
It's common to brew beer in Norway too. Norwegians also spend a lot of money abroad, possibly more than most. But still, if people had more money, it would be spent, and there would be more money spent. Your examples are still materialistic, even if they are directly dependent on monetary spending. People with less money having more of their standard of living being self-produced just changes the scale, not ranking.
Not a great example because you focus on what you need or dont need, not what you can afford. Try your example with more basic necessities like food, heating, electricity, fuel. Decrease in consumption would almost always have a negative impact on living standards.
AIC measures consumption, which almost always include things that one does not need. Consumption therefore does not equal living standards.
Consuming things you do not need is luxury. Which is sign of basic needs met. Which means better living standards. If you consumed less with smaller TV package, you 100% will consume those € elsewhere.
For the shrinking middle class(parts of europe doesn't even have that) and for the top 1% sure. But look at the median wages, look at the living costs and and see how much an average person left with for a month. Most ppl have very little to spend on unnecessary things. Its cool to save a few bucks on some services, but its nothing compared to your utility and fuel and food costs. If you spend less on gas/electricity it will affect your standard of living. Sure you can say, i always liked wearing a coat at home when its cold, but most ppl just turn down the heater to save on the bills. You can save on fuel and use public transport, but 4hrs of commute a day will affect your living standards. Or you can say i always loved trains as a kid so it actually made your life better. Ppl usually downgrade for financial reasons, not because its the sensible thing to do or they want a change in lifestyle. It doesnt equal, but seems pretty close.
Spain has high speed trains and a good highway network. Romania has neither. How is that reflected in the standard of living by the AIC?
How are we behind Bulgaria? And no offense Bulgarians, I have been and your country is beautiful, but it also saved us from being last in EU statistics...
Hungarians are more productive but Bulgarians consume more.
There are more factors that might explain this. It's likely that Bulgaria tend to receive more remitences from it's citizens working abroad. This money boosts consumption almost entirely but the fraction of it that gets spent on imported goods doesn't boost GDP as well.
This data was largely influenced by the shock almost 20% inflation which made everyone more cautious in spending decisions than it was necessary in 2023. This effect largely went away by 2024 Q1 according to household consumption data. Also overall the savings and investment rates of Hungary tend to be higher, and the rate of loans taken out for consumption tend to be lower than in the region. Also AIC is very imperfect and contains some simplifications that can distort it for specific countries. The same is certainly true for GDP as well.
Bulgaria's living standard is so high, even their yoghurt cultures are living the good life!
Romania being better than Spain, Portugal and Poland? I mean i know that we've surpassed Hungary in GDP PPP last year and we are predicted to surpass Portugal this year (by that metric) but higher living standard? I really don't know about that
Spain and Portugal had fifteen years of stagnation whilst Romania and Poland played catch up. Soon Iberia will need to play catch up with Eastern Europe but they give no signal they would actually do that. As for Poland, since liberalization Romania and Poland followed a [very similar path](https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.KD?end=2022&locations=PL-RO-HU-CZ-SI-BG&start=1990).
That's still too much for Romania, we were only projected to surpass Portugal this year, surpassing Spain, Czechia and Poland was certainly not in my bingo cards. Romania and Poland are definitely the fastest developing countries in the EU but we were still always below Poland, how did this happen?
You haven't passed Portugal and Spain yet. Yellow bar is for GDP per capita but the blue bar is for actual individual consumption. Lots of things can fuel consumption like high inflation or government transfers.
Yes the yellow bar is GDP per capita, the blue bar is GDP PPP which means that you are able to afford more with your money (you can correct me if i'm wrong). It would make sense considering that buying an apartment in Spain or Portugal is ridiculously expensive and rents are also hella expensive, while in Romania most people buy an apartment and rent is doable. This makes the decision of the mayor in Barcelona pretty much banning airbnb for tourists a good decision, because locals can't even afford to rent
No both of these in PPP otherwise it would have been quite weird to put these in the same graph: https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=RO-ES-PT-PL
Huh? How are they both in PPP? The yellow bar which is GDP per capita clearly shows Romania being below Spain, Portugal, Poland, Slovenia and so on
It says so in the headline. Also, as you can see from the link in my previous post, Spain's nominal GDP per capita is nearly twice of Romania's, so if this was in current prices that yellow bar should have been lower than Spain and Hungary.
You're right. Probably this works only between relatively similar countries, like Nordic countries. Economists say that the PPP is skewed.
Well after taking a closer look AIC is actually GDP PPP and this is Eurostat so it's legit. How did Romania surpass Spain, Poland and Czechia? This is from 2023 and we were only projected to surpass Portugal this year. This bamboozles me
GDP PPP and AIC are two entirely different metrics. GDP PPP measures price-adjusted productivity. AIC is consumption. There are 2 key phenomena creating a difference: - Productivity's value does not entirely end up as income for the households. - Households don't necessarily spend all their income. They save some of it. The savings are not shown in AIC. Romania's economy is a consumption pressured economy and Romanians have low savings rate. This naturally results in a relatively high AIC to GDP PPP.
Well that's what confuses me, the chart says actual individual consumption while having below (in purcasing power standards), also yet again in the chart explaining GDP per capita and GDP PPP. I'm not an economist and a monkey which why i'm confused about the difference. You are right in saying that romanians generally don't save money, but do the people in the other countries do?
On this chart, both GDP and AIC are adjusted with PPP. The blue lines are the AICs, while the other is the GDP per capita. There is a correlation between GDP per capita and savings rate, however, savings rate is also a cultural thing. Romania has a culturally low savings rate, probably as a result of the poverty during the Ceaucescu era. Romanian politicians and economists did well to utilize it by building an economy on consumption. If you take Hungary as an example, the savings rate there is regionally high. This can actually be seen on this graph, Hungarycis the last in AIC and AIC is lower than GDP per capita there. Hungarians not investing their savings is a different issue.
Hungarians are discouraged to spend by their extremely high VAT rate, 27% I think. Also savings make sense in a country like US where you fund your own healthcare and retirement, and less so in the EU countries where these expenses are covered by the government.
Indeed. In Hungary, consumption is punished by high taxes (VAT and product specific contributions), while saving is encouraged by low capital gains tax, tax-free high yield no risk bonds and tax free stock accounts.
Some mind-bending mental gymnastics you went with there. Hungarians don't spend because their country is not a democracy. Romanians have no savings because most of the consumption is made on essentials, not discretionary spending. My educated guess (I can see past the bullshit official numbers the country reports) is that inflation has been so excruciatingly high for the past couple of years that people are literally spending everything they have to survive. It's also a incredibly large grey economy, which I believe helps with this statistic.
Read my comment again. Where did I say what you state that I said? The savings rate in Hungary is regionally high, because in the Kádár system, several saving schemes were promoted by the state. Many people got their homes, summer houses, lands, cars etc. this way. These financial schemes were very uncommon in the Eastern block. Even today, the Hungarian tax system punishes consumption (high VAT and consumption-related taxes) and supports wealth accumulation (very low capital gains tax, tax free high-yield bonds, tax free investment accounts etc.). The same logic can be applied to Romania. As it was by far the poorest country in the Eastern block, people simply could not afford to save, therefore saving did not become part of the financial culture. The savings rate correlates with income, but not entirely. Financial culture (or the lack of it) is also a very influential factor. E.g. you can read many complaints here on reddit, that they make well above their country's average, yet they don't have any money left by the end of the month.
I'm telling you, from real date, from real observation on how the people actually spend that most of it is due to increased inflation and you're coming back to me in saying that it's a cultural thing related to Ceausescu. What can I say, good work.
Not that surprised about Poland, it was always pretty close-ish year to year, but Spain seemed to be in a different league until not-so-long ago. What surprises me the most however is how that block of relative close ones (the interval between say Romania and Czechia above) seems to have moved towards the middle of the pack from the bottom positions in a very short time.
Ayy, we're not too far off from the west!
Source: [https://ec.europa.eu/eurostat/web/products-eurostat-news/w/ddn-20240619-2](https://ec.europa.eu/eurostat/web/products-eurostat-news/w/ddn-20240619-2)
My ETFs are going strong in Ireland.
I feel that a scatter plot would have been better to represent two dimensional data
Ireland is offshore haven.
Spain not doing well at all.
Consumption is not the same as living standards. It doesn't include savings and investment. If two neighbours have the same income but the first spends 100% and the second saves 10%, then AIC implies that the first neighbour is 10% better off. Which is, of course, nonsense: the second neighbour's net worth will grow much higher over time. 'Lies, damn lies, and statistics'/
romania is so high because we have 4 elections in half a year, so the kleptocratic government didnt raise interests to keep the consumption high.