Economic growth and real convergence in Central and Eastern Europe: lessons for the future enlargement of the EU

The EU's ongoing enlargement process, which encompasses Ukraine, Moldova and the Western Balkans, gained momentum following Russia's full-scale invasion of Ukraine. Previous enlargements provide important lessons, especially in 2004, 2007 and 2013, when a total of 11 Central and Eastern European countries joined the EU. As it was then, income and economic development in the candidate countries are at a lower level than in the EU. With future enlargement, many issues from the past will be repeated, for example whether the economies of the candidate countries will catch up with the Member States. Furthermore, it is also relevant for the EU to determine whether membership of the Union leads to better economic development.

In this European Policy Analysis, Mariusz Próchniak and Ryszard Rapacki (professors of Economics at the Warsaw School of Economics) explore the drivers of economic growth in the 11 former candidate countries and examine whether the economies of the (former) new and old Member States have converged over time. 

The study identifies the main drivers of economic growth in the context of the old candidate countries’ EU-membership. The researchers find that improved governance has resulted in increased growth. The same applies to the impact of foreign direct investment, EU funds and international trade. Thereafter, economic convergence is analyzed in several calculations. The results indicate that EU membership has brought the economies of the new and old Member States closer together: economic growth in the old candidate countries has been higher than in the rest of the Union, and income inequality between the old and new Member States has narrowed over time. Convergence has been particularly strong for Bulgaria, Romania, Poland and Lithuania.

The researchers point out that EU membership may benefit the current candidate countries in a similar way, but they also note that these countries do not fulfil the economic requirements to the same extent as the previous ones. Thus, political considerations risk becoming the strongest driving force for their EU membership. The geopolitical situation also differs, the new candidate countries are surrounded by more high-risk factors, especially in terms of Russian influence.

For EU membership to have a positive impact on growth and convergence, the candidate countries need to thoroughly reform the institutional structures of their economies. Weak and ineffective institutions may slow down or completely thwart the economic development of the candidate countries. Being a member of the European Union will not generate successful economies per se.

The researchers conclude by giving policy recommendations to the new candidate countries. They highlight the need to develop institutions and to increase social inclusion, for example in the labour market and in education. Furthermore, it is crucial to fight corruption. The lack of clear rules, lack of transparency in decision-making and unclear laws feed corruption and lead to excessive bureaucracy, which in turn hampers economic development.

The introductory chapter of the analysis discusses economic growth and convergence in the old candidate countries between 2004 and 2023. Chapters 3 and 4 are technical chapters with empirical calculations: Chapter 3 examines growth in the old candidate countries through a quantitative analysis based on various variables that (according to many previous studies) have been shown to affect countries' economic development. Chapter 4 presents the results of the quantitative analyses of both growth and income convergence. Chapter 5 discusses the differences and similarities between the old and new candidate countries. Chapter 6 concludes the study with policy recommendations for the new candidate countries.