In this article, we take a look at the 25 least developed countries in Europe. You can skip our detailed analysis of the uneven development in Europe and go directly to the 10 Least Developed Countries in Europe.
Europe is the richest continent in the world on a per Capita basis but most of its high development is concentrated in the Western region. Some of the countries in Europe still lag behind in human development. These are primarily located in the Eastern region.
For instance, GDP per Capita in Germany and the United Kingdom, two Western European countries, is $51,204 and $46,510, respectively. On the other hand, GDP per Capita in Moldova and Belarus, two Eastern European countries, is $5,231 and $7,302, respectively, according to 2021 figures from the World Bank.
There is a bit of a historical context to it. Countries in Western Europe had economically liberalized far earlier than other countries on the continent. Many countries in Eastern Europe were part of, or within the sphere of influence of, the Soviet Union, with centrally-planned economies, which stagnated development in the subregion.
Eastern European countries started liberalizing after the dissolution of the Soviet Union. However, the results have been mixed. Some countries have liberalized far more successfully than others.
Consequently, Eastern European members of the EU joined it much later than their western counterparts, which further gave Western Europe an advantage in free trade, access to the European market and financial support.
Countries in Eastern Europe also lacked the geographical advantage of Western European countries in larger connectedness with the world through trade routes in the Mediterranean Sea and the Atlantic Ocean.
Lastly, structural problems within these countries like corruption and inefficient governance had only exacerbated the problem. According to the 2020 CPI, several Eastern European countries have relatively high levels of corruption, including Bulgaria, Romania, and Belarus, which all scored below 50 on a scale of 0 (highly corrupt) to 100 (very clean).
However, as many of the Eastern European countries have liberalized, the gap between the East and the West in Europe is closing fast.
Many of the Eastern European companies are highly competitive globally. Further, US companies like Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft Corporation (NASDAQ:MSFT) have been increasingly accessing Eastern European markets.
Copyright: leungchopan / 123RF Stock Photo
We have defined ‘least developed countries in Europe’ as ones that have relatively low GDPs per Capita as of 2021. In this regard, we’ve ranked them in descending order of low GDP per Capita.
With that in mind, let’s move on to the 25 least developed countries in Europe. Bear in mind, however, that Europe is a relatively highly developed region. Some of the countries on the list are above, or in-line with, the global average in development.
25. Czech Republic
GDP per Capita: $26,821
The Czech Republic lags behind many of its Western European peers due to several factors. The Czech Republic attracts relatively lower foreign investment than its western counterparts because of its comparatively small domestic market, which also makes it harder for it to achieve similar economies of scale.
However, it is certainly faring better than most other countries in Central and Eastern Europe.
GDP per Capita: $24,567
Portugal is located on the Iberian Peninsula. The two factors that have kept it behind Western European countries are productivity and huge public debt.
According to the CaixaBank Research, Portugal’s GDP per Hour Worked in 2020 was only 73% of the EU’s and 66% of that of the EU Area countries. The country’s public debt is also an obstacle for the government to invest in public infrastructure.
GDP per Capita: $23,723
Lithuania’s transport and energy infrastructure is not as developed as Western European countries, making it one of the least developed countries in Europe, with a GDP per Capita of $23,723.
GDP per Capita: $21,392
Slovakia is a landlocked country in Central Europe. There are several reasons it lags behind its Western European counterparts, from a small domestic market, to low innovation rate and lack of structural reforms.
Slovakia also has a high net emigration rate and the economy is almost entirely dependent on exports, comprising 94% of its GDP, leaving the economy vulnerable to externalities like demand shocks and trade tariffs.
GDP per Capita: $21,148
Latvia has a relatively low GDP per Capita of $21,148 as of 2021. It also has high income inequality and a high net-emigration rate, leading to brain drain in the country, and resulting in lower foreign investment.
GDP per Capita: $20,193
Greece has had a history of economic mismanagement that led it to default on its IMF debt of $1.7 billion in 2015. Its unemployment rate is also the second highest in the EU, at 11.6% as of 2022.
Moreover, Greece has had a poor track record of implementing structural changes like labor market reforms, privatization and pension reforms.
GDP per Capita Ranking: $18,728
Hungary has structural problems that prevent it from reaching development levels similar to Western European countries. These include struggle with corruption and rule of law, low innovation, small domestic market and relatively low foreign investment.
GDP per Capita: $18,000
Poland has a huge economy but its human development is moderately lower than Western European countries. It is 38% of the average GDP per Capita of Western European countries.
GDP per Capita: $17,685
Croatia has a GDP per Capita of $17,685 as of 2021. The country receives lower levels of foreign investment than the wealthy European countries. Croatia is still recovering from the aftermath of the Yugoslav wars in the 1990s, which had resulted in significant damages to its infrastructure.
GDP per Capita: $14,858
Romania is the twelfth biggest country in Europe and one of the most populous countries on the continent. The factors that have hindered development in Romania include corruption, low investment, slow transition to market economy and low productivity, among others.
GDP per Capita: $12,221.5
Bulgaria is located in the Balkan region of Europe. Factors such as low productivity, lower foreign investment, an aging population, and low-skill industries have kept Bulgaria from reaching the development levels of its Western European counterparts.
GDP per Capita: $12,195
Russia is the biggest country by area, and the ninth most populous country in the world. However, despite having a huge GDP of $1.8 trillion, Russia is one of the least developed countries in Europe. It has to do with the fact that corruption is rampant in Russia.
The Corruption Perception Index of 2021 ranked Russia in 136th position, indicating high levels of corruption in the country. Further, Russia’s economy was heavily reliant on the energy sector and exports to the EU countries.
However, in response to its ongoing assault on Ukraine, the EU and the UK have banned the import of Russian seaborne crude and put a price cap of $60 per barrel on oil it sells to other countries, to hurt its energy revenue.
These measures, combined with other western sanctions, are expected to further hurt the Russian economy. Major global companies like Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG) and Microsoft Corporation (NASDAQ:MSFT) have seized their operations in Russia and left the country.
GDP per Capita: $9,661
Turkey is a transcontinental country located in both Europe and Asia. There are a number of factors why Turkey is not as developed as Western European countries. These include, among others, limited access to the European markets, bureaucratic inefficiency and a high net-emigration rate.
GDP per Capita: $9,466
Montenegro is located in the Balkan region of Europe, and is one of the least developed countries in Europe. It is the result of a small population and a small domestic market with limited potential, combined with the aftermath of the Yugoslav wars, and challenges in fully transitioning to a market economy.
GDP per Capita: $9,230
Serbia is a landlocked country in Central Europe. There are many reasons the country lags behind in development. It is still recovering from the damages caused by the Yugoslavia wars, and political instability is a rampant problem in the country.
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Disclosure: none. 25 Least Developed Countries in Europe is originally published on Insider Monkey.