The Czech Republic faces economic headwinds as the latest data from the Czech Statistical Office (CSÚ) reveals a concerning trend of declining real wages amidst a backdrop of rising inflation. Despite a nominal wage increase of 6.3 percent year-on-year in the last quarter of the previous year, inflation outpaced wage growth, resulting in a 1.2 percent decline in real wages, marking the ninth consecutive quarter of decline.

Jitka Erhartová, head of CSÚ’s Labor Statistics Department, confirms this unsettling pattern, highlighting the persistent erosion of real wages despite nominal increases. The median wage, reflecting a six percent annual increase to 39,685 crowns, underscores the breadth of this trend, with eight percent of employees earning wages ranging between 20,073 and 74,654 crowns.

Sectors such as mining, extraction, accommodation, catering, hospitality, water supply, and activities related to wastewater and waste management witnessed the highest annual wage increases, averaging around ten percent.

While the average wage for the entire previous year saw a substantial year-on-year increase of 7.5 percent to 43,341 crowns, Erhartová elucidates the grim reality of a 2.9 percent decline in real wages due to soaring inflation, which reached 10.7 percent. This marks the second consecutive year of real wage decline following an 8.5 percent drop in 2022.

Despite these challenges, analysts foresee signs of a potential upturn. Tomáš Volf, an analyst at Citfin, anticipates a reversal of the declining trend in real wages in the coming months, buoyed by subdued inflation and robust nominal wage growth. Additionally, a more favorable economic outlook compared to previous years suggests the potential for real wage growth. Pavel Sobíšek, chief economist at UniCredit Bank, predicts a potential 3.5 percent increase in real wages this year, signaling a hopeful trajectory toward economic recovery and improved living standards.

Article by Prague Forum