Albanians are working more and being paid "less"

2024-11-18 07:18:00, Ekonomi CNA

The growth of the unit labor cost indicator slowed again in the second quarter of the year.

According to the Bank of Albania, the unit labor cost indicator increased by 2.2%, from the 7.8% increase in the previous quarter.

Unit labor cost growth had the strongest growth in the second quarter of 2023, at approximately 15%. Since then, growth has been slowing.

In the analysis of the Bank of Albania, the slowdown in growth rates is related to the slower growth of the real wage, against the faster growth of labor productivity.

According to the Bank of Albania, the average salary in the private sector continued to grow in the second quarter, but at lower rates than before. Wage growth fell to 6.9%, from 12.7% a quarter ago. This slowdown reflects a strong statistical base effect from a year ago, when private sector wage growth was 15%. However, this effect came mainly from the increase in the minimum wage in the economy.

The impact of the increase in the minimum wage has faded in the second quarter of the current year. The slowdown in nominal wage growth rates has also been reflected in their real growth. Adjusted for the effect of inflation, average wage growth slowed to 4.8% in the second quarter of 2024, from 10% in the previous quarter.

The growth of other production costs also continued to slow down during the second quarter of the year. Producer price index (PPI) growth was 1.7% from 2.8% in the first quarter.

Downward pressures were mainly determined by the slowdown in production prices for the domestic market (2.3% from 3.5%), while production prices for export slowed moderately (0.2% from 0.5%).

Finally, the construction cost index (IKN) recorded an annual increase of 2.5% in the second quarter or 0.9 percentage points lower than in the previous quarter.

Slower growth in production costs, starting with labor costs, appears to be easing inflationary pressures in the economy.

In the last two months, inflation has remained at the level of 1.9%, the lowest in the last three years. However, internal inflation continues to have the overwhelming contribution to the general rate of inflation in Albania.

According to the Bank of Albania, of the 2% average inflation for the second quarter of this year, 1.7 percentage points (over 85% of total inflation) was the contribution of internal inflation.

Although the domestic economy remains the main driver of inflationary pressures in the economy, it seems that in the last quarters these pressures have somewhat slowed down.

The Bank of Albania decided this month to lower the base interest rate for the second time this year, bringing it to the level of 2.75%./ Monitor Magazine