Ukraine’s real wage gains still positive but fall in dollar terms in March

Ukraine’s real wage gains still positive but fall in dollar terms in March
In March the effects of the mounting crises were starting to make themselves felt on Ukraine's income. Nominal wages rose to over 11,000 hryvnia for the first time but the dollar value fell to $412 in March
By bne IntelliNews May 27, 2020

The average income in Ukraine has been rising steadily in recent years and climbed from a mere UAH6.659 ($221) in January 2017 – making Ukrainians the poorest people in Europe –  to almost double to UAH10.727 ($439) this January.

The New Year got off to a good start and it looked like wages would continue to rise and the improving income was already apparent in retail sales, which had been following wages upwards. A feel-good factor was starting to kick in, as in parallel to steadily rising incomes inflation fell fast thanks to the prudent management of the National Bank of Ukraine (NBU), which meant the money went even further.

Incomes reached UAH10.847 ($441) in February, but in March the effects of the mounting oil price and coronavirus (COVID-19) crises were already starting to make themselves felt. By March, despite nominal wages rising to over 11,000 for the first time (UAH11,446), the dollar value fell to $412 that month.

Likewise, retail sales already plunged in March as the government introduced the first travel restrictions and the lockdown was ratcheted up. 

Now with unemployment rising as firms start to go bankrupt the outlook for wages in dollar and real terms has deteriorated for the rest of the year. The NBU’s hard work in 2019 will pay dividends this year and while inflation will increase this year from circa 3% currently, the NBU predicts it will be 6% by the end of the year, so the squeeze on real incomes will be limited and nominal wage increases should more or less keep pace with inflation. Nominal wages increased at 9.5% in March, leaving real wage increases in the black for the meantime.

But much will depend on how quickly the economy can be restarted following the month-and-a-half lockdown and also how many of the migrant workers leave to look for employment in the neighbouring countries. Nearly half a million workers had registered as out of work as of the end of May, according to the labour ministry, but at the same time employers in Poland and Germany are getting increasingly desperate for the return of seasonal workers, which will alleviate the unemployment pressure if most leave again.

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