Real Wages Rise After Three Years, But Czech Purchasing Power Remains Low

In a significant economic shift, Czech real wages have finally shown growth after three years of decline, thanks to inflation dropping to 2.4% from the previous year’s 10.7%. However, the recovery comes with a sobering reality: the purchasing power of Czech citizens remains at 2018 levels due to the previous inflationary storm.

According to Petr Dufek, chief economist at Creditas Bank, real wages increased by approximately 4.4% last year. While this is positive news, it barely compensates for the dramatic 11% decline in real wages during 2022-2023. The average gross wage reached 45,412 Czech crowns in the third quarter of last year, marking a 7% year-on-year increase, though two-thirds of workers still earn below this average.

The Czech Statistical Office reports that while goods prices rose by 0.9% last year, service costs increased by 5.1%. The most significant price hikes were seen in electricity, dining services, and tobacco, along with notable increases in rent, water, and waste collection fees. Interestingly, food prices decreased by 2.3%, with the most substantial reductions in milk, cheese, eggs, and meat products.

Looking ahead to 2025, experts anticipate continued moderate growth. Dufek projects real wages could increase by approximately 3% this year, potentially bringing earnings closer to 2019 levels. However, he cautions that recovering from the severe impact of high inflation in 2022-2023 will be neither simple nor quick.

The Czech National Bank maintains a cautiously optimistic outlook, with Vice-Governor Eva Zamrazilová suggesting that January’s inflation figures will likely start with “2” rather than “3,” potentially allowing for continued monetary policy easing early this year.