29 Jul 2022 19:29

National Bank of Ukraine estimates unemployment in Q2 at 35%, expects decline to 28.9% by year-end

MOSCOW. July 29 (Interfax) - The economic slump caused by the crisis in Ukraine boosted unemployment to 35% (based on the International Labor Organization calculation methodology) in Q2 2022, and the substantial reduction in economic activity has dramatically cut personal incomes, Ukrainian media said with reference to the National Bank of Ukraine's inflation review published on its official website.

The level of unemployment should lower by the end of the year from the peak seen in Q2 2022 due to economic recovery and growing demand for workforce, the NBU said. However, just as it happened in other countries (i.e. former Yugoslavia), unemployment will be going down slowly and will stay at a higher level than before even after the active phase of the crisis is over, it said.

In particular, unemployment in Ukraine should decline only to 27% in 2023 and to 18.2% in 2024, the bank said.

The NBU expects nominal wages in Ukraine to decrease by 12%, while real wages (adjusted to inflation) are to fall by 27% in 2022.

As the economy starts recovering and demand for labor reviving, nominal wages will be growing rapidly to exceed the pre-crisis level as early as 2023. However, taking into account inflationary processes, real wages at the end of 2024 will be still below the pre-crisis level, the NBU said.

Nominal wages are expected to grow by 36.3% on average in 2023 and by 31.3% in 2024, while real wages should grow by 17.8% and 16.6% respectively, it said. Nominal wages are expected to decline on average by 13.5% and real ones by 33% in 2022.

Citing surveys, the NBU said that businesses in Ukraine tried to keep paying salaries at the beginning of the crisis, and some even made extra payments or provided material assistance to their employees at the time. However, as its active phase continued, they have started laying off their employees increasingly more often and are mostly unable to pay pre-crisis wages now.

"The significant excess of supply over demand on the labor market is also driving salary expectations down, even despite the accelerating inflation," the NBU said.