Swedbank: Estonia – Wage pressures expected to ease a bit next year

SwedbankWage growth is rapid and broad-based. The average gross wage amounted to EUR 1,419, up by 7.4%, over the year, in the second quarter. Wage growth was broad-based, in terms of sectors and levels. Tax Authority’s wage data show that the average gross wage increased among all wage deciles, by around 8%, over the year, in the first half of 2019. 

Wage growth in the public sector has exceeded wage growth in the private sector in the past year. Private sector, exposed to global competition, has found it harder lifting its labour costs as rapidly.

As export demand and Estonia’s economy are expected to grow at a slower pace next year, demand for labour should ease, at least in the exporting industry. So, wage growth should moderate, from very high levels (from 8.1% in 2019 to 6.5% in 2020 and 5.5% in 2021). Wages in the public sector are also expected to grow at a slower pace, due to fiscal constraints in the budget.

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