Slovenia, meanwhile, is on the verge of releasing its first positive real wage growth. This announcement is particularly notable given the dramatic change in Europe’s demographic trends, and as employment rates are declining. This data, which boasts of a nominal wage growth 9.3% year-on-year, seems to contradict an employment drop of 0.8%. As the nation grapples with these changes, broader trends within the European Union (EU) signal an ageing population that is reshaping economic landscapes.
According to the latest available statistics, Slovenia’s nominal wage growth has jumped up to 9.3% y-o-y. That stunning increase included a period when employment has actually continued to go down. This contrast begs the question of how long this type of wage growth can be maintained with a decreasing labor pool. In April, Slovenia had the largest annual producer price increase at 1.0%. In contrast, the rest of the region experienced a 1.4% drop in producer prices. These numbers indicate that although wages are increasing as employers compete for workers, persistent economic pressures may inhibit wage growth going forward.
Regional Economic Trends
Through the lens of Central and Eastern Europe (CEE), economic indicators share a different story per nation’s economic performance. Poland’s resilience demonstrated once again, with a 1.2% year-on-year industrial output increase in April. Poland’s industrial sector proved a rock of Gibraltar in the regional storms last month. By contrast, neighboring Croatia saw their labor market go in the opposite direction, as unemployment fell to 4.6% in April. Yet Croatia’s real wage growth recently slowed to 6.4% year-on-year as inflationary pressures ring across the region and sap purchasing power.
Both the Polish zloty and the Romanian leu have gained against the euro this week as well. This trend reflects a broader shift towards greater currency stability across the region. As a result, it provides hugely important insights into future economic confidence and investor sentiment. These currencies becoming stronger is an indicator of the strengthening underlying economic climate which could impact US trade patterns and cross-border investments.
Demographic Shifts Across Europe
Eurostat has recently released demographic data that confirms a long-expected and concerning trend of an ageing population throughout the EU. Slovakia has the youngest demographic profile in Central and Eastern Europe, with a median age of only 42.6 years. Yet it’s experienced the fastest increase in its median age in the country over that decade, increasing by four years. Countries such as Ireland, Luxembourg and Malta have a median age of less than 40 years, keeping their populations more youthful.
The economic consequences of these demographic changes are enormous. An ageing population not only stresses public resources and social systems, but it affects supply of labor and economy’s productivity capacity. As countries such as Slovenia are forced to face these challenges, they need to match the rate of wage growth along with the new economic workforce realities.