Czechia's average wage surges by 7 percent, but declines in real terms

A recent report by the Czech Statistical Office (CZSO) finds that the average gross salary across Czechia has grown to about CZK 42,600 monthly, but has declined in real terms for the past two years.

As of the third quarter of 2023, nominal wage growth soared by 7.1 percent year on year to CZK 42,658 crowns, yet when factoring in inflation, real wages took a dip of 0.8 percent year on year.

Chief economist of financial services firm Cyrrus Vít Hradil anticipates a continued decline in real terms, estimating a potential further decrease of around 2.5 percent by the end of the year. This trend follows a dire 2022, during which Czechs experienced a staggering 8.5 percent plunge in real earnings, leaving their purchasing power akin to levels last seen in 2018.

Attributed as the primary culprit for this setback, Deloitte's chief economist David Marek pointed to inflation. He highlighted the impact of heightened energy prices due to the ongoing geopolitical situation and also underscored prior economic policies marked by high deficits in public finances and a fragile monetary strategy.

Six out of 10 employees in the Czech labor force are dissatisfied with their wages. Insufficient employer response to inflation's impact over the past two years contributed to this sentiment.

Amidst this challenging landscape, only specific sectors experienced real wage growth. Employees in the energy sector saw a notable improvement, with a 13.7 percent nominal increase translating to a 5.3 percent real rise. Similarly, individuals in information and communication activities, accommodation, catering, hospitality, real estate, and manufacturing witnessed slight increases in their purchasing power.

Geographically, nominal wage growth spanned between 5.9 to 8 percent across regions, with Prague showcasing the lowest nominal increase. Despite this, Prague maintained its status as the best-earning region, boasting an average wage of almost CZK 52,000 crowns, while the Karlovy Vary region saw the lowest average earnings at CZK 37,164.

As analysts project a probable stagnation in the fourth quarter with potential growth only anticipated in the first quarter of the upcoming year, the Czech Republic navigates through a challenging economic landscape, grappling with prolonged real wage decline amid broader global and domestic economic factors.