Prague’s GDP per capita has reached 205 percent of the European Union average, which means that the Czech capital places third in wealth in the ranking of EU regions, according to recently published Eurostat data from 2019. Analysts say that Prague’s high ranking is due to the city’s long-term catching up with the Western world as well as how the Prague region is classified.
The statistics from Eurostat do not necessarily speak about the inhabitants of Prague, their standard of living, or economic possibilities.
“It’s not about the wealth of the people who live in the region. But about the wealth that will be created there and at the same time about the wealth that companies based in the given area create,” explained Lukáš Kovanda, the chief economist of Trinity Bank.
According to Eurostat, the ranking of Prague can be explained by the high number of people who commute to Prague for work but do not live there.
“For example, the inhabitants of Benešov commute to Prague for work and create some value that will be then budgeted among Praguers,” added Kovanda.
Pavel Ryska, an analyst at J&T Banka, believes that Prague won third place, among other things, because the entire Czech Republic has long been on the heels of Western European countries.
“In the last five years, respectively before the coronavirus pandemic, the Czech economy has grown faster than the EU average. Prague has thus caught up with Western cities,” said Ryska. “Convergence not only of Prague but also of the Czech Republic is, indeed, taking place.“
In this regard, Kovanda mentioned recently published data from the International Monetary Fund (IMF), according to which the Czech Republic surpassed Italy and Spain in terms of GDP per capita last year. The IMF forecast even claims that in 2025 the economic performance of the Czech Republic will surpass Japan or New Zealand.
“Wages are rising and purchasing power of people with it. We still haven’t caught up with our role model — famous Germany, and we won’t catch up easily. But we are succeeding in pulling the lead of other Western economies, especially the southern ones,” added the economist.
Kovanda talked about another factor that, according to him, contributed to the third place of Prague, namely foreign investment.
“Unlike in Slovakia, for example, there was no such slowdown in foreign direct investment after the last crisis, after 2009. The inflow of capital from rich countries continues,” said Kovanda. Bratislava is now in 13th place in the Eurostat rankings, although in 2013 it finished ahead of Prague and placed fourth.
In terms of GDP per capita, the richest European region has long been the Luxembourg capital, Luxembourg City, which has 260 percent of the EU average GDP — right behind it is southern Ireland with 240 percent.
Experts agree that similar statistics from Eurostat and other institutions need to be read in context. Ryska, for example, draws attention to the problems of the regions themselves, with which the EU statistical office works.
“These regions are defined by their size. In the Czech Republic, these regions do not copy our regions, nor do they copy local provinces in other countries either. When we look at France, for example, Paris is like a region connected to its surroundings. As a result, in some countries, cities, and metropolises are included in a larger area, which in turn reduces their average economic performance per capita. In contrast, Prague is narrowly defined in statistics only as the city itself, which helps,” explained Ryska.
Title image: People cross the medieval Charles Bridge after first snowfall in Prague, Czech Republic, Thursday, Dec. 3, 2020. (AP Photo/Petr David Josek)