Flash comment: Lithuania - May 25, 2012:The real net wage still negative in the 1Q 2012, but expected to enter the positive territory later this year

1. Flash comment: Lithuania
Economic commentary by Economic Research Department May 25, 2012
The real net wage still negative in the 1Q 2012, but expected to enter
the positive territory later this year
Wages and productivity, annual growth In the first quarter of 2012 the average gross monthly earnings in
rates the whole economy (except for individual enterprises) accounted
25% LTL 2138 (EUR 619) and were 3.2% higher than in the same
20% quarter last year. During this period average gross earnings in the
15%
public sector rose more than in the private sector, by 4.1% and
10%
5% 2.9% respectively.
0%
-5%
The inflation adjusted wages after taxes remain negative (0.6%
-10% lower than a year ago) for the thirteenth consecutive quarter. At the
-15% same time the real growth of labour productivity per person
2006 2007 2008 2009 2010 2011 2012 employed remain positive (2%) increasing the competitiveness of
Gros s nom inal wage, yoy local producers in the global market.
Net real wage, yoy
Labour productivity per person em ployed, yoy
Source: Statistics Lithuania, Sw edbank In quarterly comparison the average gross monthly earnings shrank
by 1.7%: by 2.5% in the public sector and by 1% in the private
sector. The decline was influenced by seasonal factors: a decrease
Labour market in irregular bonuses, premiums and one-off monetary allowances
24% 17.8% as well as by a decrease in the volume of works (in agricultural,
20% 15.4% construction and other enterprises).
16% 13.7% 13.0%
11.0%
12% 4.3% 5.8%
8%
4%
2.7% 4.3% 4.6% Outlook
0%
-4% The three year long internal devaluation is likely to be over this
-8% year, and we forecast 4.3% increase in nominal wages on average
-12%
this year, considerably faster than last year’s 2.7% rate. Since
2007 2008 2009 2010 2011 2012f 2013f
Unem ployment rate
nominal salaries’ growth will outpace inflation later this year and the
Gross nominal wage, yoy next, real net wage growth will be positive for the first time since
Net real wage, yoy
Labour productivity per pers on em ployed, yoy 2008 and will increase by 1.4% and 2.0% on average this year and
Source: Statistics Lithuania, Sw edbank the next, respectively. Competitiveness will not be lost, as labour
productivity during the same period is expected to increase by
1.2% and 2.5%.
Generally, the growth of wages will vary in different sectors and will
depend on mismatch in skill demand/supply. Salaries are likely to
increase faster for high skilled employees which are in short supply,
while they will stagnate for unskilled employees. Most companies
will remain cautious due to the developments in euro area and the
possible impact on local market. Meanwhile employees’ negotiation
power is still low in respond to high unemployment.
Lina Vrubliauskienė
Senior Economist
+ 370 5 258 2275
lina.vrubliauskiene@swedbank.lt
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reliable sources and methods in the preparation of the analyses reported in this publication.
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