Systematic surpluses of exports over imports create space for rising wages in the countries of the Visegrad Group.
Fast growing wages in the countries of Central and Eastern Europe result, on the one hand, from a deliberate economic policy oriented towards the accomplishment of this goal (for example, in many countries of the region the minimum wage is being raised at a fast pace) and, on the other hand, from a limited supply of labor, and qualified labor in particular.
Excessively fast wage growth may lead to the loss of competitiveness by the economy in question and, consequently, to an external imbalance in the form of a strongly negative balance of goods and services. The Visegrad countries, including Poland, have been systematically recording high surpluses of exports over imports; therefore, currently the risk of imbalance for this group of countries seems insignificant.
In this respect, Hungary has the most comfortable situation – net exports of this country in the Q2’17 exceeded 10 per cent of GDP. In the Czech Republic, this indicator has been growing dynamically since 2015 and currently remains at a level slightly above 8 per cent of GDP. In Poland and Slovakia, it is around 3.5 per cent of GDP.
The starting position for continued wage growth in Romania and Bulgaria – countries which are leaders in increasing the minimum wage (since the beginning of the decade by 141 per cent and 92 per cent, respectively) – looks much worse. The Romanian economy has not generated a surplus of exports over imports even once over the recent decade and the negative net exports have started to increase markedly since 2014. Over the last decade, Bulgaria recorded a positive balance of goods and services only twice – in 2011 and last year. At the end of the second quarter of this year, the country was once again below the line.
Łukasz Czernicki is an economist and PhD student of the Potsdam University.