Flash comment: Estonia - August 15, 2019
Labour shortages could ease somewhat next year
No significant changes in Q2 data
According to Statistics Estonia, labour market remained tight but did not improve further in the 2nd quarter. The number of the employed and the number of the unemployed stayed at last year’s level. Employment’s quarterly data are very volatile in Estonia. Employment has increased by +1.0% in the first half of the year, mostly in the services’ sector. The unemployment rate remained low, at 5.1% in the 2nd quarter, slightly above the 4.7% in the first quarter.

The number of job vacancies and the number of persons leaving on their own initiative remains high. The scarcity of labour is more pronounced in the services’ sector (around 1/3 of the companies reporting the scarcity of labour as their main concern) and less acute in manufacturing (1/4 of companies highlighting finding suitable work force as their main challenge). Without foreigners, labour market would be even tighter. There are around 20,000 foreigners working on short-term contracts in Estonia, around 80% from Ukraine.

Wage pressures could ease a bit next year
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 could moderate, from very high levels. Wages in the public sector are also expected to grow at a slower pace, due to fiscal constraints in the budget.

We expect employment to remain at current levels and the unemployment rate to stay low, slightly above 5%, in 2020. The average gross wage should increase by around 8% in 2019, 6.5% in 2020, and 5.5% in 2021.

For more information about this report, please contact Ms. Liis Elmik, liis.elmik@swedbank.ee, +372 888 7206.

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