Flash comment: Lithuania - August 26, 2016
Wage growth accelerated to 8.1% in Q2

In the second quarter of this year annual nominal growth of gross wages accelerated to 8.1%, while real net wages increased by 7.7%. Wage growth was driven by continued rise in the demand for qualified labour force and shrinking supply of such employees. A 17% annual increase in minimum wage this year had a significant effect on the acceleration of wage growth, especially in some sectors. Net wages were also affected by higher non-taxable income threshold as of January 1st.

Wage growth diverged even more in private and public sector, where they increased by 9.4% and 5.9% respectively. 

Outlook: wage pressures will not ease

We expect gross wage growth to ease, but only slightly to 6% from the next year. Even though this year activity rise compensated for negative demographics, this most likely will not be enough in the future and labour force will start shrinking again from next year. Moreover, most of current unemployed have no professional training (сa 40%), have lost their skills or they are mismatched in the labour market. This will drive real income growth and further rise in consumption. Productivity growth is expected to strengthen as investments in productivity resumed, but the risks of lower or less sustainable growth are rising.

For more information about this report, please contact Ms. Vaiva Šečkutė, +370 610 08360, Vaiva.Seckute@swedbank.lt

This email is sent through the Research Department’s web-based distribution system. As a subscriber you can change your settings regarding what publications you will receive by clicking “Change your settings” you can also unsubscribe by clicking "Unsubscribe".


This letter is distributed by Swedbank in cooperation with Brightly. The letter is personal.