Higher inflation in recent years and more volatile commodity prices have resulted in diverging nominal and real GDP per capita trends in many regions
After over a decade of primarily low inflation in regions, the relatively little spread in regional price changes for most regions began to widen in 2021, driven by significant differences in price changes across industries (Figure 1.1), especially in regions with substantial primary sector activities. Between 2015 and 2022, regions specialising in the primary sector saw overall regional price increases (measured with regional GDP deflators) that were, on average, 1.1 times the national median and up to 1.8 times in Antofagasta, Chile. Conversely, GDP deflators in capital-city regions were, on average, 0.96 times the national median in 2022. This slower price growth in capital-city regions was most notable in Bucharest, Romania, and Bogotá, Colombia, where regional price changes in the period were 0.89 and 0.7 times the national median respectively.
Regional price changes affect the measurement of the relative growth performance of regions. The difference between the region with the highest and lowest real GDP per capita growth in 2015‑22 relative to the national average was an average of 23 percentage points (p.p.) across large regions in 37 OECD member and accession countries with available data. Chile, Colombia, Mexico and Romania had differences of more than 60 p.p. Although measures using regional price deflators show similar levels of median dispersion to national price deflators, they switch relative growth from positive to negative in 38 regions and from negative to positive in 56 regions (accounting in each case for 11% of the OECD population) (Figure 1.5 and Figure 1.6). Real GDP per capita adjusted by regional price changes grew faster than the national average across 18 capital-city regions. Using national price changes would show only 9 did. For regions specialised in the primary sector, close to half (22 out of 54) of the regions growing below the national average would show real GDP per capita growth above the national average if national rather than regional price changes were used.
Regional inequality measured in real GDP per capita terms (using regional price changes at the small region level where available) increased between 2019 and 2022 compared to 2015-18 in 17 out of 31 countries with available data (Figure 1.2). Over 2021 and 2022, most countries (21 out of 27) broadly continued the inequality trends seen from 2000 to 2020 (OECD, 2023). In Estonia, Hungary, Italy and the United Kingdom, inequality began to fall in 2019 and kept dropping after the pandemic. In Norway and Spain, inequality moved slightly upward after 2020. Whilst national rather than regional price indices show similar trends, national price changes would show smaller decreases in inequality in Denmark, Portugal and Türkiye and larger increases in Czechia, Finland and Hungary. However, using regional price changes reverses the trend for some countries: from decreasing to increasing in Ireland, Romania, and the Slovak Republic and from increasing to decreasing in Türkiye.
Although the use of regional rather than national price changes does not significantly change the perspective of non-metropolitan performance relative to metropolitan areas, they do point to a greater degree of persistence (Figure 1.3). From 2020 onwards, improvements in GDP per capita gaps seen using national GDP deflators, especially in regions far from functional urban areas (FUAs), were mostly due to differential regional price movements and not real GDP per capita growth, as average gaps using regional deflators were typically larger for all types of non-metropolitan regions. Across countries, the gap between metropolitan and non-metropolitan regions widened in 16 out of 30 OECD member and accession countries with available data, with the largest increases in Slovak Republic, Hungary and Romania (Figure 1.4). Using national price changes would suggest that the gap closed in 5 of these 16 countries.
