Real wage growth speeds to 4.1% y/y in Croatia

Real net wage increased by 4.1% y/y in March, speeding up from the 2.8% y/y increase in February, our calculations, based on preliminary data released today by the stat office, show. Nominal net wage also rose, by 5.2% y/y in March, faster than 4.3-4.4% in the previous two months. The nominal net wage reached HRK6,022 on average in March. The increases this year should be at least partially due to tax changes as of the beginning of the year, which is to continue supporting private incomes in the following months too. Other factors that have played a role comprise the increase in the minimum wage and the 6% wage hike for public sector employees.

Note that real wages have started to increase at a moderate rate already at the end of 2013 and the pace accelerated substantially as of the beginning of 2015 when income tax changes came into effect. Thus, the positive effects seemed to have been coming from prices and tax changes mainly, which is logical as companies are still deleveraging and have little room to increase the remunerations. The latter was recently confirmed by the Croatian Employers’ Association (HUP) chairman Davor Majetic who stressed that the economy was still weak. Yet, we think that some upward pressure might occur in some branches that have been complaining of lack of workers lately, like tourism, shipbuilding, construction, ICT and others.

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