Flash comment: Estonia - Previously rapid wage growth stalls this year
Previously rapid wage growth stalls in Estonia this year
• Wage growth decelerated to 4.8%, over the year, in Q1. 
• Swedbank expects wages to grow by only 0.5% this year. 

Wage growth decelerated in the first quarter 
Gross wage growth decelerated to 4.8%, over the year, in the first quarter. The average monthly gross wage amounted to 1404 euros. By sectors, wage growth was still very rapid in the ICT sector where demand is still strong, while most other sectors saw a deceleration in wage growth rates. In the construction and manufacturing industry, wage growth amounted to 5-6%, in a year, while the average wage stayed at last year’s level in tourism, entertainment, and labour income declined in trade. 

The situation in the labour market changed dramatically in the second quarter

Currently, a quarter of the total labour force (50,000 + 120,000 persons) is either unemployed or participates in the government’s wage-support scheme. According to a recent survey by Swedbank, 17% of respondents had seen a decline in their income. Household sentiment improved in May compared with a very weak April. In May 57% of the families expected their economic situation to remain stable in the future, 14% expected an improvement, and 21% expected things to get worse. 

Wage growth is expected to disappear in 2020 
An economic crisis and a surging unemployment rate slow gross wage growth to 0.5% in 2020. Wages in the private sector will be hit harder than the wages in the public sector. 

Job losses and wage cuts mean lower consumption. The loosening of restrictions and the opening of shopping centres has lifted retail trade volumes but not to levels seen before the crisis, based on Swedbank’s clients’ data. Shaky sentiment and different restrictions have boosted savings. Household deposits grew by 11.5%, over the year, in April. Demand for credit has shrunk. The volume of car leases dropped by 66% and housing loan volumes by a quarter, in April, over the year. 

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

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