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Wages about to overtake Productivity - After nearly two years, labour costs are likely to surpass those of labour productivity, says Eesti Pank in a mid-November analysis.

- This was an expected development, since the labour market responds to economic growth with a lag and the strong results of the first half of the year motivated employers to hire and raise wages. When productivity growth declines, wage growth will start pressuring profits. This once again stresses the need for labour-market flexibility, continues Estonia’s Central Bank.

According to Statistics Estonia, the third 2011 quarter’s number of employed increased by 8,6% year-on-year and the unemployment rate decreased to 10,9%. The employment growth was rather broad-based with the strongest recovery taking place in manufacturing and construction - the business sectors being hit hardest during the crisis.

- However, uncertainty in the external environment and a slowdown in demand will influence Estonia's economic indicators in the fourth quarter. The export growth and thus also industrial production growth will decrease. As a result, the employment growth is also expected to level out, concludes Eesti Pank.