Czechs Richer Than Japanese? GDP Averages Distort Reality

International comparisons are popular in the Czech Republic, whether it’s measuring per capita beer consumption or gross domestic product. Well-known economists and politicians also engage in this sport.

Two years ago, former PM Andrej Babiš boasted that the Czech Republic had overtaken Spain in living standards, claiming, “today we are like Italy.”

In terms of GDP per capita in purchasing power parity, this claim would have been true two years ago and still holds some weight today.

According to the International Monetary Fund’s 2022 data, the Czech Republic ranks 35th with $48,919, Spain is in 37th place with $46,551, and Italy is in 31st place with $51,062. Japan, on the other hand, is slightly behind the Czech Republic in 36th place with $48,813.

However, GDP alone doesn’t accurately measure living standards. The Human Development Index (HDI) is a more comprehensive indicator, measuring human health, educational attainment, and material living standards.

The HDI ranges from zero for the least developed countries to one for the most developed.

According to the United Nations’ HDI, the Czech Republic (0.889) still lags behind Italy (0.895), Spain (0.905), Japan (0.925), and even Slovenia (0.918). The Czech Republic’s score is similar to Estonia (0.890) and Greece (0.887).

It’s important to note the significant regional differences in Spain and Italy. When people think of Spain, they might think of Barcelona, and when they think of Italy, they might think of Milan.

However, the Czech Republic as a whole (93% of the EU average GDP) is no richer than regions such as the Basque Country (108%), Catalonia (98%), or Lombardy (128%).

Wealthy Prague (204%) boosts the Czech Republic’s overall GDP, while the poorest region, the North-West, which comprises the Karlovy Vary and Ústí nad Labem regions (61%), is still ahead of regions such as Sicily (58%) or Calabria (56%) in terms of GDP in purchasing power parity.

Despite the pandemic and the war in Ukraine, the Czechs are still better off. The Fraser Institute’s index of economic freedom shows that the Czech Republic has jumped from 101st to 20th place since 1990.

Economic freedom and low levels of redistribution appear to be boosting innovative activity, stimulating productivity growth. According to the global innovation index, the Czech Republic is the second most innovative economy in the former Eastern bloc after Estonia.

In contrast, Slovakia has been on a downward trend since around 2015, despite previously being neck and neck with the Czech Republic in various rankings.

Today, Slovakia is the poorest of the Visegrad Four countries in terms of GDP per capita in purchasing power parity ($38,620) and is third, just ahead of Hungary, in the human development index (0.848).