Can the good run of central Europe’s economies last?

FIFTEEN YEARS after they joined the EU, the four “Visegrad” states of central Europe (the V4) can be prouder of their economic achievements than of their patchy record on political reform. The Czech Republic, Hungary, Poland and Slovakia have increased their levels of GDP per head dramatically, and are converging with their mighty neighbour Germany. The Czechs are the richest, with a GDP per head that is 73% of Germany’s, followed by Slovakia with 63% and Hungary and Poland with around 57% each—and the gap continues to close, as their growth outpaces that of the behemoth (see chart).

Four main external forces have driven the remarkable successes of the four extremely open V4 economies. The first is their access to generous subsidies from the EU, which make up a sizeable chunk of their respective national incomes. Second is the munificent flow of remittances from millions of expat V4 citizens who now live and work in the EU, especially in Germany, Austria or Britain. A benevolent recent economic environment has also helped, especially the success of the German economy, by far their most important trading partner and the biggest or second-biggest investor in each country. And lastly, the four all started from a low base, enabling them to serve as cheap workshops for more developed economies. The danger is that all four of these factors are now petering out.