Here’s What the U.S. Can Learn From the Baltic Recovery
While European Union members along the shores of the Mediterranean struggle with a seemingly endless slump, others who dip their toes in the Baltic are making a strong comeback. As the following chart shows, real gross domestic product growth in the Baltic 3 — Estonia, Latvia, and Lithuania — has recently run well above the euro area average. Meanwhile, the Med 4 — Greece, Italy, Spain and Portugal — continue their downward trajectories. Official forecasts call for their economies to bottom out in 2014, but predictions have been wrong before.
Some readers might object that this chart is misleading, since, to facilitate comparison, it shows output in all of the economies on a scale with 2004 equal to 100. Isn’t it simply the case that the Baltic countries are much poorer, and it is easier to grow from a low base? Besides, what is there to brag about when real GDP in the Baltic 3 hasn’t even gotten back to its pre-crisis peak?
Fair enough. Let’s change the scale, then, to show each country’s per capita GDP relative to the EU average, rather than relative to its own 2004 value. The next chart does that. It confirms that the Baltic 3 were the poorest members of the EU when they joined in 2004. Since that time, though, they have made great progress while the Med 4 have lost ground. It appears likely that Estonia and Lithuania will pass Greece and Portugal in per capita GDP as early as the end of this year, with Latvia not far behind. Note also that in terms of living standards, all three Baltic countries were already above their pre-crisis peaks by the end of last year. Not so bad, after all.