Data released Wednesday by the Central Statistical Bureau showed that the average monthly gross salary in the country for full-time work in Q2 2023 was EUR 1,525 and the net salary was EUR 1,114. During the year, it increased by 11.7%, beating the 0.1 percentage point rise in consumer prices.
Clover noted that wages are currently growing in Lithuania and Estonia at a similar pace, and the current wage rise is faster than in the previous 4-5 years when wages in Latvia grew on average by 6-8% a year.
“The good news of this is that wages in Latvia are rising again faster than prices and the purchasing power of the population is beginning to increase again after almost two years of decline, although over the last two and a half years prices in Latvia have increased by more than 30% and it will take time for wages to catch this price increase,” said the Citadele economist.
The Latvian central bank (Bank of Latvia) economist Andrejs Migunovs also acknowledged that even though wage growth is now very close to the inflation rate, which will continue to fall in the future, Latvians still need time to regain their purchasing power since the beginning of 2022. “The fact that real wages will no longer decrease is already positive – let us get richer in the future.”
The economist at Citadele Bank acknowledged that there is no doubt that wages will continue to grow in Latvia and the pressure to raise wages will be high in both the state and private sectors.
“The level of income in Latvia is still lagging behind the average level of the European Union. Unemployment rates are historically low, and even with relatively weak economic growth in Latvia there is no basis for an increase in unemployment,” said Āboliņš.
He added that the fight for employees would escalate. “For the economy as a whole, this is a major challenge, of course, and in certain sectors, such as healthcare or education, the lack of employees will be very acute,” believes the economist at Citadele Bank.
In his opinion, in 3-4 years, the average salary in Latvia could exceed EUR 2,000 before taxes.
However, according to the economist at the Bank of Latvia, as the Latvian economy experienced a downturn in the second quarter of this year, entrepreneurs could become more cautious in the future and begin to consolidate their spending. “It could also ease the pressure on the pace of wage growth.”