{"id":10928,"date":"2023-11-08T06:03:25","date_gmt":"2023-11-08T06:03:25","guid":{"rendered":"https:\/\/infundpros.com\/business\/soaring-wage-growth-risks-blunting-eastern-europes-edge-imf-warns\/"},"modified":"2023-11-08T06:03:25","modified_gmt":"2023-11-08T06:03:25","slug":"soaring-wage-growth-risks-blunting-eastern-europes-edge-imf-warns","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=10928","title":{"rendered":"Soaring wage growth risks blunting eastern Europe\u2019s edge, IMF warns"},"content":{"rendered":"<div>\n<p>Unlock the Editor\u2019s Digest for free<\/p>\n<p class=\"article__content-sign-up-topic-description\"><span>Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.<\/span><\/p>\n<p><iframe class=\"article__content-sign-up-iframe close\" scrolling=\"no\" id=\"signUpIframe\" data-prev-url=\"\/register\/in-article-sign-up?ft-content-uuid=fd88d374-ebd7-4905-b822-d40ad59d52d6\"><\/iframe><\/div>\n<div id=\"article-body\">\n<p>The IMF has warned rapid wage increases in central and eastern Europe risk eroding the region\u2019s competitive edge. <\/p>\n<p>Incomes have risen at double-digit levels in many countries in the region recent years, but the fund says productivity has largely stalled. <\/p>\n<p>Alfred Kammer, head of the European department of the IMF, told the Financial Times the trend \u201ccould create a competitiveness problem\u201d for a region that has benefited from western European companies relocating production there. <\/p>\n<p>Kammer said that while high wage increases had long been the norm in the region, those seen in recent years were \u201cof a different calibre\u201d. <\/p>\n<p>\u201cOur warning is don\u2019t get complacent and think this is due to a productivity increase,\u201d he said ahead of the publication of the IMF\u2019s annual report on Europe\u2019s economic outlook. \u201cIt isn\u2019t.\u201d<\/p>\n<p>Wages rose at double-digit annual rates in much of central and eastern Europe in the second quarter \u2014 from 16.9 per cent in Hungary to 9.9 per cent in Slovakia, with the region topping the EU tables for pay rises and outstripping the bloc\u2019s 4.5 per cent average. However, inflation in much of the region has also far exceeded the EU average. <\/p>\n<p>Wages are expected to grow at a weighted average of 11 per cent for 2023 as a whole, slowing to 7 per cent next year and 6 per cent in 2025, according to the IMF outlook. <\/p>\n<p>The report is expected to put the fund on a collision course with eastern European governments, which have long targeted higher wages as one of the big benefits of EU membership. <\/p>\n<p>Up until now, those gains for the region\u2019s workers have been matched by improvements in productivity, with the competitiveness of the region\u2019s workforce helping to attract vast sums of foreign direct investment, epitomised by western European carmakers opening new factories there. <\/p>\n<p>But some countries, including Romania or Poland, have had millions of workers flock west, leading to tightness in the labour market \u2014\u00a0and creating fertile ground for those remaining to ask for bumper pay rises. <\/p>\n<p>The IMF said the region\u2019s governments should reduce budget deficits and implement measures to improve \u201cworker relocation\u201d, increase labour force participation and boost productivity. <\/p>\n<p>Far from slowing down the trend, the incoming coalition government in Poland headed by Donald Tusk is expected to raise wages further in response to strong pressure from trade unions, which argue high inflation has hit their members hard. <\/p>\n<p>Thousands of public workers demonstrated in Warsaw in September to demand\u00a0such salary increases. Tusk and his partners have pledged to increase public sector wages by 20 per cent across the board.<\/p>\n<p>The IMF said a \u201csoft landing\u201d was expected for most of the European economy, with inflation falling steadily and growth set to make a modest rebound from 1.3 per cent this year to 1.5 per cent next year.<\/p>\n<p>But Kammer warned central banks against cutting interest rates too early, which could \u201creignite\u201d inflation, leading to an even more painful series of rate rises to damp it down again.<\/p>\n<p>The European Central Bank last month kept its policy rates unchanged for the first time in 15 months, but some central banks in countries that are not in the eurozone have started to cut rates recently, including those in Poland and Hungary.<\/p>\n<p>Kammer said: \u201cRates need to stay high at close to these levels for a considerable time for many of the central banks throughout 2024 in order to achieve their inflation targets in 2025.\u201d<\/p>\n<p>Inflation in advanced Europe would fall from 5.8 per cent this year to 3.3 per cent next year, the IMF forecast, adding that inflation in European emerging market economies would drop from 11.9 per cent this year to 5.8 per cent next year.<\/p>\n<p><em>Additional reporting by Marton Dunai in Budapest and Raphael Minder in Warsaw<\/em><\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.ft.com\/content\/fd88d374-ebd7-4905-b822-d40ad59d52d6\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Unlock the Editor\u2019s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter. The IMF&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22],"tags":[],"class_list":{"0":"post-10928","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Soaring wage growth risks blunting eastern Europe\u2019s edge, IMF warns | inFundPros<\/title>\n<meta name=\"description\" content=\"Unlock the Editor\u2019s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The IMF has warned rapid wage\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/infundpros.com\/?p=10928\" \/>\n<meta property=\"og:locale\" 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