Estonian wage growth continues to accelerate in third quarter

By bne IntelliNews November 26, 2015

Estonia’s average monthly gross wage grew 6.9% y/y in Q3 to reach €1,045, data from Statistics Estonia showed on November 26. 

The figure marks a pick up in what was an already quick pace of growth. Wages expanded 5.8% in Q2 and 5% in the third quarter of last year. Real wages increased even faster, at 7.5%, due to ongoing deflation, which came in at 0.6% y/y in October. Real wages have now increased for seventeen quarters in succession.

While wages and deflation have been helping support economic growth by pushing conumption, the tightening labour market is worrying analysts. Concern that over its effect on sustainable growth and investment only grew earlier this month when it was reported that the economy managed an expansion of just 0.5% y/y in the third quarter. The slowdown was marked by buckling manufacturing and trade. 

Private consumption is forecast to decelerate through to 2017, according to the European Commission. The EU executive projects GDP growth of 1.9% in 2015 and 2.6% in 2016.

Estonian wages may well continue growth, however, as demographic challenges dent the working age population. There are other factors that will also push the trend in the medium term, note analysts at Swedbank.

"Wage growth will also be fast next year as the lack of suitable labour remains a concern," they write. "An agreed 10% increase in the minimum wage in 2016 will also have an impact. The growth of wages in real terms will slow in 2016 compared with 2015 as prices will start growing and labour taxes will be lowered less than this year."

 

Related Articles

Latvia’s ABLV bank asks US authorities to stop sanctions procedure

Latvian lender ABLV has asked the US Financial Crimes Enforcement Network (FinCEN) not to go forward with sanctions against it for money laundering, the bank said on April 20. Latvia’s ... more

Lithuanian retail group Maxima Grupe to place €300mn-€400mn bond issue

Lithuanian retail giant Maxima Grupe is planning a bond issue worth €300mn-€400mn in order to diversify financing and reduce its dependence on borrowing from banks, Lithuanian ... more

Latvia to probe tram tender awarded to Russian-controlled Railvec

Latvia’s state security service, the Constitution Protection Bureau (SAB), plans to scrutinise a tender to deliver trams to the country’s second-largest city won by a Russian company with ties to ... more

Dismiss