Flash comment: Latvia - May 30, 2016
Annual gross wage up by 5.3% in 1Q 2016

  • Gross wage growth decelerated to 5.3% in 1Q 2016
  • Wage growth forecast at about 6% this year
  • Consumption remain rather cautious

As expected, gross wage growth decelerated in the beginning of 2016, partly owing to a much slower increase in minimum wage than in the previous two years. In the first quarter, average gross wage increased by 5.3% annually, similarly also net wage. Wages in the privates sector grew by 6%, in the public sector by 4%. As consumer prices fell by 0.4%, real net wage increased by 5.6%.

Wage growth was observed in almost all main industries, somewhat slower in financial sector, IT and communications, education, professional and administrative services.

While income growth remains rather strong, consumption continues rising rather cautiously. Retail trade grew by about 2% in the first quarter (about 4% without fuel) and similar growth was observed also in April (1.8%, 2.2% without fuel). As consumption remains the main driver of growth, this does not signal a pickup in economic growth yet.

Outlook

Wage growth this year will be slower than in 2015, but we still expect it to be about 6%. Economic growth has slowed down and labour market is heating up slower (unemployment is not falling anymore and employment growth is very small), so wage pressures weakened somewhat. However, they are still present and with economic growth picking up, unemployment is forecast to decrease and wage pressures to strengthen again.


 

For more information please contact Ms. Lija Strašuna, +371 67445875, lija.strasuna@swedbank.lv

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