Labour productivity increased faster than the growth of labour costs in the Estonian business sector in the first half of the year, Eesti Pank (The Bank of Estonia) announced on October 25.
This is the first such occurrence in “several years,” the bank said, and that it is a welcome development in the Estonian economy, which has struggled with the pool of labour force becoming shallower due to emigration and its ageing population.
Growing productivity has helped Estonian businesses attain a growth in profit in the first half of the year, Eesti Pank also noted. “Had profits fallen any further, production in Estonia may have become less attractive and the risk of a sharp cut in jobs in the event of a shock to the economy could have increased,” the bank said.
It warned, however, against taking the improving productivity to growth ratio as a given. “Without further investment in production technology, the rise in productivity may prove only temporary,” Eesti Pank’s Orsolya Soosaar said in a comment.
At the beginning of the year, The International Monetary Fund had said in a report that Estonia needed to enhance its labour productivity in order to maintain its competitive edge.
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