Discover the remarkable economic growth of Eastern Europe over the past three decades, outpacing Western Europe with an average annual GDP growth rate of 3.6% compared to 2.1%. This phenomenal rise can be traced back to the fall of the Soviet Union, which catalyzed a shift from a planned communist economy to a free market capitalist system. Witness the transformation of countries like Poland, where the implementation of significant economic reforms, or 'shock therapy', led to the emergence of thousands of private businesses, such as Samiko Okmes, a Polish company that quickly grew into a Western supermarket concept, raking in millions of dollars within two years.
Explore the economic advantages brought about by EU membership, including trade access, funding, and increased investment. Hungary serves as a prime example of how EU membership can supercharge a country's economy. Learn about the role of foreign direct investment, with Western companies flocking to the region, attracted by skilled labor, lower costs, and favorable business environments. Slovakia's experience underscores the positive impact of EU accession negotiations, leading to a surge in foreign direct investment, especially in the automotive industry.
Delve into the technological advancements of Eastern European countries. Romania stands out with its significant progress in the technology sector, investing heavily in internet availability and becoming Europe's leader in average internet peak connection speed. Learn about their emphasis on e-learning and the government's investment in universities to develop IT-related programs, leading to the rise of Cluj Napoca as Romania's Silicon Valley. Similarly, Czechia has become a magnet for venture capital, fostering a vibrant entrepreneurial community and supporting startup growth.
However, the journey is not without challenges. The region grapples with issues such as corruption, an aging population, low fertility rates, and brain drain. Despite the potential for growth, uncertainty remains whether Eastern Europe will catch up to or surpass Western Europe. Subscribe for more updates on this fascinating region's economic and technological journey.
you Is it possible for Eastern Europe to become better than Western Europe? That's a question that many people are thinking about. In the video later, we'll give you the answer, but we'd also like to hear your thoughts on this. To do that, you'll need to listen to the part about the recent growth of East European countries. Because the rise of East is unbelievable, as research indicates that over the last 30 years, the average annual GDP growth rate for Eastern European countries was around 3. 6%, while Western Europe recorded an average of 4. 5%. of only 2. 1% during the same period.
In today's video, we will discuss the rise of Poland as economic giant, Romania as IT hub, and many more, and we'll answer the question, will East surpass West keeping in comparison the economic statistics? But before that we would like you to subscribe to the channel. Another thing, for this video we're going to use the United Nations definition of Eastern Europe, which includes countries that were once part of the Soviet bloc and located east of the Iron Curtain. These countries are Romania, Bulgaria, Poland, Czechia, Hungary, and Slovakia. On the other hand, when we talk about Western Europe, we'll focus on Germany, Austria, the Netherlands, Belgium, Luxembourg and France. So why has the East grown really fast? Let's begin.
The main reason for Eastern Europe's growth was the fall of the Soviet Union, which led to a shift from a planned communist economy to a free-market capitalist system. Let's take Poland as an example. After the USSR's collapse, the Polish government introduced the Balcerowicz plan. in 1990, which brought about significant economic reforms known as shock therapy. This plan aimed to rapidly transform the economy by reducing inflation, deregulating prices, ending shortages, cutting subsidies to state enterprises and opening up foreign trade. Surprisingly, the majority of growth came from the rise of thousands of new private Polish businesses rather than the privatization of large state-run enterprises. One example is. . . Samiko Okmes, a Polish company that embraced the Western supermarket concept, transforming the shopping experience.
They removed service counters, allowing customers to freely browse and choose products. With the introduction of Western foods and 24-7 operating hours, Samiko Okmes quickly expanded, opening five stores and achieving millions of dollars in sales within two years. Many other newly established businesses experienced similar success. Thanks to the bell system, customers can now order their food online. Samiko Okmes, a Polish company that embraced the Western supermarket concept, transforming Serovich plan, the economy expanded significantly, and GDP per capita soared from 2. 5K in 1990 to an impressive 16K in 2020, a remarkable growth of over 530%. Moreover, exports surged from 10 billion in 1990 to a staggering 260 billion in 2020. Another factor behind Eastern Europe's growth is becoming part of the EU.
In 2004, the EU expanded significantly by including several former Soviet-bloc nations like Poland, Czechia, Slovakia and Hungary. Later in 2007, Romania and Bulgaria also joined. EU membership brought several benefits, including frictionless trade through access to the EU single market, EU funding and increased private investment from Western companies. Hungary serves as an excellent example of how EU membership can boost a country's economy. After joining in 2004, Hungary's GDP soared from 105 billion to 158 billion in just four years. Today, Hungary continues to be one of the highest net beneficiaries of EU funding, receiving over 3 billion euros annually. In 2021, Hungary ranked as the third highest net beneficiary of EU funds, following Greece and Poland. Similarly, another reason for the rise of Eastern Europe is foreign direct investment.
Foreign direct investment is when a company or individual from one country invests in a business or project located in another country. After the fall of the Soviet Union and Eastern Europe's integration into the European Union, it became very appealing for big Western companies. to invest in the region. Eastern Europe offered a skilled workforce. lower labor costs, and favorable business environments with fewer unions and lower taxes. Let's take a closer look at Slovakia's experience. Slovakia faced economic challenges after the collapse of the Soviet Union. It took them about a decade to rebuild their economy and shift their exports towards Western markets. The turning point was when they started EU accession negotiations in 1999. Foreign investors responded positively.
leading to a surge in foreign direct investment. Many well-known companies like Volkswagen, Kia Motors, PSA, Jaguar, Land Rover, and Volvo invested in Slovakia, making it the world's largest car producer per capita, despite its relatively small population of four million people. This influx of FDI has been seen throughout Eastern Europe. as shown in the graph, with investments increasing significantly in the last 20 years. Several countries in the region have attracted companies, with Romania standing out as home to prominent technology giants as well. On top of that, growth of the IT industry helped Eastern Europe to flourish. Romania, in particular, stands out as the home to the largest number of IT professionals in the region.
The tech boom in Romania began in the early 2000s, partly due to the government's decision to offer near-zero income tax rates for tech workers. However, the government's support went beyond tax incentives. Firstly, they focused on digital inclusion, making sure that all Romanians had access to fast internet. The government provided computers to 200,000 underprivileged families and ensured quick internet availability throughout the country. As a result, Romania is now ranked number one in Europe for its average internet peak connection speed, and about 84% of its population use the internet. Secondly, they emphasize the internet and e-learning to improve education. The government invested in 10 to 25 computers per school with internet access, resulting in a better student-to-computer ratio compared to the global average.
Thirdly, the Romanian government heavily invested in universities to develop IT-related programs and facilities. This led to the emergence of Cluj-Napoca, known as Romania's own Silicon Valley, featuring IT companies, startups and universities. As a result of these efforts, Romania's technology sector significantly boosted its contribution to the GDP, rising from 4. 7% to nearly 7% in the last four years. However, along with IT, startups played a contributing role towards success. Startup venture capital investments in Eastern Europe have experienced a significant rise, reaching a peak of 3. 5 billion euros in 2021 compared to 0. 6 billion euros in 2012. Chekya stood out as the leader in attracting venture capital for startups in 2021. This was due to its strong economy, business-friendly environment, and a strong market.
and vibrant entrepreneurial community. Czechia actively supports startup growth through initiatives like CzechInvest and Czech Accelerator, offering financial grants, business development support, and opportunities for global expansion. Just like Romania, Czechia invested in its own innovation hub in Brno, which houses a high concentration of smaller, medium-sized businesses with their own research and development centers. The country's thriving startup ecosystem includes successful companies like Avast, Homecredit, and Kiwi. com. Studies have recognized Czechia as the second-best country in Central and Northern Eastern Europe for startups, with only Estonia surpassing it. But now we are back to the question we asked you at the beginning of the video. Can Eastern Europe surpass the Western counterpart? Let's compare.
In terms of GDP, the top spots are currently held by Germany, France and the Netherlands, with Poland as the first Eastern European country in fourth place. However, comparing based on GDP alone is unfair as Germany's larger population naturally gives it an advantage. When we look at GDP per capita, the ranking changes, with Luxembourg, the Netherlands and Austria leading the way. There's still a noticeable divide between Western and Eastern Europe. with GDP per capita dropping significantly from 33k in France to 18k in Czechia. Regarding GDP growth over the past 10 years, the picture is different again, with Eastern European countries dominating the top spots.
But even with this growth, it's unlikely that Eastern Europe will surpass Western Europe any time soon, as they still have a considerable gap to close. Additionally, as they get closer to Western levels, their growth may slow down. Several concerns may hinder their progress, such as corruption, rapid aging of the population with low fertility rates and brain drain, as skilled professionals migrate to the West. Therefore, while there is potential for growth, there's also uncertainty about whether Eastern Europe will catch up, let alone overtake Western Europe. If you like the video, do subscribe to the channel for more updates. .