Central bank governor: Tourism sector will be hit by labor shortage

Madis Müller.
Madis Müller. Source: ERR

Bank of Estonia governor Madis Müller said the tourism sector is set to be hit with a labor shortage as it begins to recover from the coronavirus crisis.

"The sectors related to tourism, hotels and entertainment are where the number of jobs have drastically decreased. These people have already found new jobs somewhere else. As this sector recovers, tourists return, people want to go out to restaurants and entertainment events, I think it will be difficult to find people to come work," Müller said on ETV's interview show "Esimene stuudio".

The central bank chief said labor shortages can bring forth a price increase in catering. "If you ask entrepreneurs about what is holding their growth back, the first thing they talk about is a lack of employees. There are clear societal and political choices, which have to be made. What kind of labor do we need? Should we go after a more highly qualified employee or a lower qualified employee, who is needed in agriculture, for example?" Müller told show host Johannes Tralla.

Speaking about real estate prices, Müller said there are very few new apartments on the market. "This is linked to a rapid increase in construction prices and also the fact that it is hard for real estate developers to plan budgets."

He noted that what is happening on the real estate market should not be called a bubble, because real estate prices have moved in lockstep with wage increases over the last decade. "On average, the affordability of real estate has not worsened in terms of purchasing power," Müller said.

He did note that real estate prices in Tallinn have grown 15 percent over the last year, which is also higher than the wage increase rate. "And there being so few on offer is not a positive. The real estate price levels could be some 10 percent lower, according to our calculations," the central bank governor said.

On Tuesday, the Bank of Estonia published its economic forecast, which stated that this year's economic growth will be 8 percent, set to slow down to below 3 percent next year. Food prices are expected to increase and energy prices may remain high for a longer period of time.


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Editor: Kristjan Kallaste

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