Analytics, Economics, Estonia, Financial Services, Wages

According to the autumn economic growth outlook compiled by the Ministry of Finance, average pay will this year grow by 6% and will remain close to that level next year.

“Actually, it would be best if pay growth would be in sync with the productivity increase in the economy. On the other hand, the situation is affected by competition from Finland and shortage of labour force,” said Ligi in an interview to Vikerraadio. “This will make wages grow faster than the GDP,” he concluded.

Ligi cautioned, however, that pay growth could not nor should not last indefinitely, unless Estonia manages to improve productivity. “This means investments and better exports markets. The sustainability of the current situation will depend on how enterprises will manage adjusting,” he said.

According to the Ministry of Finance, economic growth in 2014 and in 2015 will mostly come from domestic consumption. Andrus Säälik, Head of the Fiscal Policy Department at the Ministry of Finance, said on Monday that the contribution of exports in Estonia’s economic growth has been negative for a year already. Domestic consumption, on the other hand, is fuelled by fast growth in real pay, increase in deposits and a decline in the loan burden.