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Estonia Grappling With Wage Pressures

Estonia Grappling With Wage PressuresEstonia Grappling With Wage Pressures

The International Monetary Fund finds that the outlook for the Estonian economy is positive and growth will continue at close to 3.5% in the medium term, but noted that the biggest threat to this outlook is wage pressure not accompanied by growth in productivity.

According to the IMF, external risks for Estonia are balanced in the near term, and current growth rates may prove longer lasting than expected as consumer confidence and business confidence remain high in the euroland, Reuters reported.

Downsides include tensions in trade relations as well as the US adopting a protectionist posture. Domestic risks, meanwhile, remain predominantly negative, the IMF said.

Wage pressure is not accompanied by improvement in productivity, and this may affect the profitability of businesses in the medium term, just like their loan servicing capability, which in turn would have a negative effect on banks’ loan portfolios.

Regarding the real estate market, the IMF found that continued robust demand may drive dwelling prices even higher, leaving the banking sector vulnerable to risks.

Meanwhile, rescuers, members of the Estonian Rescue Workers Union, are planning to hold rallies in the fall to secure the pay rise they have been promised by the minister, the TV3 reported.

According to the TV newscast, Interior Minister Andres Anvelt during the negotiations on the state budget strategy promised a 20% pay rise to rescuers, which was supposed to cost over €9 million ($10.5 million). The strategy eventually approved sets out only €7 million for rescuers’ pay increases.

Toomas Suigusaar, member of the board of the Estonian Rescue Workers Union, said that their wish is to put pressure on the government because even the agreed pay rise is not enough to keep pace with the increase in the average wage. The rescuers want to get at least €1,000 a month before tax.

 

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