Flash comment: Lithuania - February 24, 2017
Public sector drives wage growth acceleration in Q4

Nominal gross wages increased by 8.7%, while real net wages rose by 7.6% in the fourth quarter of the last year compared with the same period a year ago.

Wage growth continued to be driven by minimum wage hike and higher non-taxable income threshold as of January 1st. Wage growth last year was strongest in sectors where wage levels were low. Nevertheless, wage growth last year became more broad-based due to lack of skilled labour force in more sectors than before. Divergence between wage growth in private and public sector continued to diminish as wages in health and education sectors rose.

Outlook: wage pressures will not ease

Decreased tax wedge for low wage earners will contribute to more inclusive growth, however, more needs to be done in addressing the skill mismatch and achieving a sustainable increase in public sector wages. High structural unemployment and decreasing working age population will push up average gross wage by 6.5% this year, while employment will shrink somewhat. This and higher inflation will slow down purchasing power and consumption growth. Unit labour costs have been rising, but export growth will accelerate somewhat this year due to stronger external demand and investment will recover as public sector will no longer limit its growth.


For more information about this report, please contact Ms. Vaiva Šečkutė, +370 5 258 2156, Vaiva.Seckute@swedbank.lt

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