- Eastern Europe was catching up to the West in terms of GDP growth during 2001-2011
- The effects of the recent financial crisis are clearly visible in the appearance of regions in economic decline especially in South and South-Eastern Europe
- Disparities within countries are plentiful, even in Eastern Europe where growth is concentrated in a few regions.
- In Western Europe, regional disparities are not as stark, but a general pattern of two-speed growth is emerging in France, Italy and Portugal.
Observations for policy
From 2001 to 2011 Eastern European countries were catching up to their Western counterparts in terms of real Gross Domestic Product (GDP) growth rates, despite the financial crisis. Yet regional disparities in GDP growth rates exist, as can be observed in Romania and Bulgaria. Increasing disparities are also prevalent between Southern and Northern Europe and within countries, notably in Italy, France and Portugal. These growth rate differentials are to a large extent the effect of the recent financial crisis and pose challenges for the EUās cohesive development.
The Territorial Agenda 2020 prioritises the promotion of polycentric and balanced territorial development. This priority is also set to counteract the concentration of GDP growth in capital cities, which is a consequence of the agglomeration of firms and high-skilled workers in large urban areas. This leads to a disproportionate allocation of jobs across regions and in consequence to increasing growth disparities.
The problem of unequal job opportunities is primarily addressed by the Europe 2020 strategy. The document is designed for growth, jobs and innovation through its three priorities: smart, sustainable and inclusive growth. Flagship initiatives such as āYouth on the moveā and āAn agenda for new skills and jobsā aim to bring about a convergence in employment rates towards about 75% of economically-active population, and to allow workers, especially youth, to be more mobile. This should spread employment and firms more evenly throughout Europe, and help decrease regional disparities.
The map displays averages of the real annual GDP growth rates in the period 2001 to 2011 at NUTS3 regional level. Disparities can be seen between the East and the West, and between the North and the South of Europe. To a certain extent, the recent financial crisis contributed to weaker growth particularly in Greece and Italy. In Eastern Europe, overall strong growth is noticed, particularly in Poland. This is the result of the ācatch-up effectā, where poorer countries tend to grow at faster rates than richer ones, catching up to them in the long run. Growth in the East is, however, not harmonious: in rural regions, GDP growth was lower than in urban areas, but it proved to be more resilient during the crisis. In the map this can be observed for instance in Poland and Romania where urban regions grew at a faster rate than their rural counterparts. Disparities are also clear in Bulgaria where regions with over 4% growth rate averages border regions with zero or even negative growth rate averages.
Apart from Eastern countries, the rest of Europe seems to be stagnating. An explanation for this is the fact that the recent economic crisis effects are included. The results are most obvious in Greece, Italy and France, where pre-crisis growth was countered by crisis losses, and the average is close to or below zero. This means that although many regions witnessed economic growth at moderate rates before the crisis, the recession greatly disrupted their growth pattern and, on average, their growth rate is close to or below stagnation. Furthermore, a contrast between growth rates in capital cities and those in other regions can be observed in the case of Spain, the UK, Czech Republic, France, Slovenia and others. Capital cities tend to grow faster, thus increasing intra-national regional disparities.
Concepts and methods
Gross Domestic Product (GDP) reflects the commercial value of all final goods and services produced within a given area at a given time. GDP is one of the most common measures for measuring economic performance, and therefore an important policy indicator. GDP can either be nominal or real. Nominal GDP growth rate measures the overall growth of the value of final goods and services, without looking at changes in their prices. Real GDP growth rate, on the other hand, is equal to nominal GDP minus inflation. This way, the growth in the value of a countryās output (final goods and services) is corrected by the increasing prices of products. Real GDP growth rates are always lower than nominal ones, and are more accurate indicators of economic performance.