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average wage in January was $727, only slightly up from $666 a year earlier.
Following the invasion of Ukraine at the end of February, the very sharp devaluation of the ruble hit Russian wages, which tumbled to $601 in March, but the rapid rebound of the ruble, thanks to the fast action by the Central Bank of Russia (CBR), has lifted Russian average incomes in dollar terms again to $943 as of May, the last data available.
Residents of eastern Europe are very conscious of the dollar value of their income as most people with savings keep a significant proportion in foreign exchange to protect it from the persistent currency volatility. Devaluations also send the cost of widespread imports soaring.
Ukrainian have suffered from very similar problems, as the country Ukraine is running out of money and the central bank has been unable to hold up the value of the hryvnia. The situation has been made worse by the approximately 4mn refugees living in other European countries that have been withdrawing foreign exchange using bank cards to pay for their lives outside of Ukraine, in effect fuelling capital flight.
Even if you assume that the nominal salaries have remained unchanged, the hryvnia has fallen from UAH28.4 on average in January to UAH37 as of the end of July after the National Bank of Ukraine (NBU) devalued the hryvnia by 25% on July 21.
In dollar terms that means January’s nominal salary dropped to $394 in dollar terms following the devaluation, assuming no hryvnia pay rises or decreases since the start of the year. (chart) The pain from the fall in the dollar value of incomes has been doubly compounded as even if salaries have not been cut the purchasing power of the hryvnia has been eroded by almost as much again caused by the devaluation thanks to run away inflation. Last month inflation rose to 21.5% y/y, leading the NBU to hike the prime interest rates by 25% on June 2 in an effort to curb prices rises – inflation at this level is the equivalent to a 20% pay cut even if the nominal value of wages remains the same.
And the hryvnia has not stopped falling since the NBU stepped in to devalue it. According to latest reports from Kyiv the cash rate has since fallen further in the last week to UAH41 to the dollar, which has further reduced the dollar value of wages to $355 per month, or almost $150 less than the average wage in Moldova.
32 UKRAINE Country Report XXXX 2018 www.intellinews.com