May 27, 2024

Is Prague Really the Fourth Richest Region in Europe?

Prague has recently been ranked as the fourth richest region in Europe, surpassing cities like Berlin, Brussels, and Paris based on Gross Domestic Product (GDP) per capita.

However, does this metric accurately reflect the lives of Prague’s residents?

According to a Eurostat survey, Prague’s GDP per capita in 2022 was 207 percent of the European average. This means the city’s economic output per person is significantly higher than in many other regions. GDP per capita measures the total economic output divided by the population.

In 2022, the Czech Republic’s overall GDP per capita was over CZK 634,000, while Prague’s was nearly CZK 1.5 million.

Pavel Sobíšek, chief economist at UniCredit Bank, explains that regional GDP is measured based on where businesses are registered, not necessarily where they operate. With over 660,000 entities registered in Prague, many conduct activities elsewhere.

Additionally, GDP figures are adjusted for purchasing power parity, which considers the lower cost of living in the Czech Republic but may not fully account for Prague’s higher living costs. Sobíšek recommends looking at net income per capita for a more accurate comparison. This measure shows Prague’s economic advantage as more modest compared to other regions.

Vladimír Kermiet from the Czech Statistical Office highlights that commuter workers, particularly from the Central Bohemian Region, inflate Prague’s GDP. However, household income statistics show Prague trailing behind cities like Paris, many German cities, and Madrid.

Despite its high GDP, Prague faces common European city challenges. The Prague Institute of Planning and Development found that while many Prague residents own homes, new home purchases are largely restricted to those with above-average incomes. This trend is particularly evident in Prague.

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Buying a home in Prague can cost more than twelve times the average annual gross salary. Vienna, though slightly better in this regard, requires eleven annual salaries for a home. However, Vienna’s low rent prices, about twelve percent of the average gross salary, make housing rental a more common practice.

Prague has the highest income in Central Europe but falls behind in a broader European context. Workers in Copenhagen and Munich earn up to twice as much, and salaries in Vienna are about a third higher. However, 79 percent of Prague residents find job opportunities readily accessible.

Prague’s public transport is efficient and environmentally friendly. When considering monthly fares relative to income, Prague ranks among the cheapest, along with Bucharest, Budapest, and Milan.

While Prague’s GDP per capita suggests affluence, other indicators paint a more complex picture. High living costs, especially in housing, and relatively lower incomes compared to Western European cities, suggest that Prague’s wealth might not be as straightforward as GDP figures imply.

 

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