In Latvia and Estonia the highest growth of average wages among Baltics

SEB PankDue to a reduction in labour taxes, average net (after tax) wages in the first half of 2015 in Estonia and Latvia rose at a quicker pace than gross wages. In Lithuania the average net wages rose a little bit slower than gross wages, says the newest SEB Baltic Household Outlook presented by SEB Baltic household experts.

Compared to a year ago Latvia demonstrates the fastest net wage growth in the region. In the second quarter the average net salaries rose by 7.5 per cent year-on-year, reaching the 600 euro level for the first time. Average net salaries increased by 7.3 per cent to 871 euros in Estonia and by 4.4 per cent to 554 euros in Lithuania.

At the same time, average gross wages in Latvia increased by 6.6 per cent year-on-year, also reaching the highest growth rate among the Baltic countries. In the second quarter average gross wages even rose by 6.9 per cent compared to the second quarter of 2014. In Estonia wage growth rate was 5.8 per cent in the second quarter. In Lithuania wages rose at a slower rate compared to other Baltic countries. Lithuania posted a 4.6 per cent increase in average gross wages in the second quarter of 2015.

Due to record low inflation rate, households continue to benefit from the nominal wage growth. In Estonia real average net salaries rose by 7.3 per cent. In Latvia and Lithuania the real income of employed persons rose by 6.6 per cent and 5.1 per cent respectively. In Estonia and Latvia the average real income is above the pre-crisis level, while Lithuania is still below this level.

SEB Latvia Socioeconomics Expert Edmunds Rudzitis: “Due to falling energy and food prices the average inflation was close to zero. Thus real earnings and the purchasing power of employed persons has increased. Accordingly this stimulated the consumption, which is the main driver of economic growth in the Baltic countries. Comparing with previous year, transport, food and housing costs are lower than a year ago. Decrease in fuel prices has helped to reduce the expenditure on transport by 5-7 per cent. Also heating prices are lower compared to the previous heating season, thus heating costs should not be larger than in the previous heating season as well.”

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