Flash comment: Estonia - September 1, 2015
Wage growth accelerated
• Monthly gross wages amounted to 1,082 euros, +5.8%, yoy, in Q2.
• At the same time, net wages were up by 7.3% in real terms because of 0% inflation and lower labour taxes.

The growth of gross wages accelerated from 4.5% in Q1 to 5.8% in Q2. Irregular bonuses and premiums increased by 2.9% per employee and contributed to the growth of wages by 0.1 percentage points.

Wages increased in almost all sectors, except for construction which has been hit by low demand. Construction volumes have decreased for two years by now. The largest increases in average monthly wages took place in sectors that sell their products and services mainly in the domestic market, such as real estate, agriculture,  tourism, entertainment, education, and healthcare.

Households’ real purchasing power will grow markedly this year. Although the growth of gross wages will slow a bit compared to last year (+5% in 2015, according to our forecast), smaller labour taxes and deflation will result in a remarkable surge in the households’ purchasing power. Net wages were up by 7.1% in real terms in the first half of the year.

A rise in wages and social benefits will support private consumption, which will be the biggest contributor to GDP growth in 2015. Consumption is a thankworthy support to Estonia’s economic growth as exports and investments remain weak. Consumption-fuelled growth cannot last long, however. Therefore, if export sales will not improve, the growth of wages will slow.

For more information about this report, please contact Ms. Liis Elmik, liis.elmik@swedbank.ee, +372 888 7206
This letter is distributed by Swedbank in cooperation with Brightly. The letter is personal.