IMF warns of inflation risks as central Europe hammers out 2024 wage deals
By Gergely Szakacs
BUDAPEST (Reuters) — Big hikes in the minimum wage planned in central Europe for next year raise the risk of more persistent inflation or job losses amid relatively weak productivity growth across the region, the International Monetary Fund (IMF) has warned.
With inflation easing from double-digit levels, the region's economies are at a turning point as ebbing price growth nudges real wages back into positive territory, which governments hope will aid consumption and a broader economic recovery next year.
However, that expected boon to the region's economies, which have slowed sharply or even contracted due to high inflation, could also pose risks if companies push rising wage costs on to customers with further price hikes.
The Polish minimum wage, already the region's highest based on Eurostat data, is set to rise by some 20% next year. Romania's government hiked the minimum wage by 10% from October, while Hungary has signalled a possible 10% to 15% increase.
The Czech government has been considering a 9% to 12% raise, which would also surpass the expected pace of inflation next year after a long period falling real wages which has crippled demand and sent the economy into a sustained downturn this year.
Some central banks in the region have responded to weaker price growth by lowering interest rates, led by Poland and Hungary which are still expected to run inflation rates well above their policy targets next year.
While minimum wages since 2019 have largely risen in line with inflation, caution is needed going forward, Geoff Gottlieb, the IMF's Senior Regional Representative for Central, Eastern and South-Eastern Europe told Reuters.
«In some countries in the CEE region, large additional increases
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