Nigeria, Egypt to drive Africa, Middle East nominal salary increase to 6.1% in 2019

BASED ON THE ANTICI PATED roles to be played by Nigeria and Egypt in salary increment in Africa and the Middle East regions, ECA International, an international human resources consulting firm, has suggested that Africa and Middle East will record the largest salary increase of 0.7 percent, which will be driven by Nigeria and Egypt.

In 2018, the UK based firm predicted that the region’s nominal salary increase will be at 4.8 percent, but for Egypt and Nigeria, where salaries increased by 3.5 percent and 2 percent respectively more than the original prediction, the region’s actual increase was 5.5 percent.

This is in stark contrast to the trend in recent years, which has shown a less generous salary growth than anticipated.

When calculating pay increases, inflation is a key consideration for employers in ensuring that employees are not left any worse off from year to year. By comparing nominal increases against inflation, it is possible to arrive at salary awards in ‘real’ terms, which shows the change in buying power for the employee, and with that in mind, Nigeria’s nominal increase of 12.4 percent was measured against inflation of 12.4 percent, reflecting a real decrease of 0.4 percent. Despite having a high nominal increase, statistics reflect a very low real pay increase.

According to ECA’s Salary Trends survey, the average salary increase for locally employed staff around the world was 4 percent in 2018, and have been pegged at the same rate of 4 percent in 2019 to show that we might see no change in the globally as regards to average salary increase.

While European and global median salaries have remained ultimately stable, Asia Pacific remains the only region where actual increases were lower than predicted.

In terms of real salaries, in 2018, the global average was 1.7 percent and has been forecasted to reduce marginally to 1.2 percent in 2019. Africa and Middle East region’s real salary is expected to drop to 0.7 percent from 2018’s figure of 1.2 percent, while, leading the countries with poor real term salary is Argentina, where salaries have seen a complete reversal from the forecast situation in last year’s report. Early optimism generated by market-friendly policies, and the confidence this fostered in the economy, resulting in forecast real pay awards for Argentina of 7.2 percent in 2018. This confidence quickly vanished. The peso nose-dived, losing more than half its value, and inflation, rather than experiencing a significant fall as was predicted, has soared to well over 30 percent, causing the central bank to raise interest rates to a worldhigh of 60 percent. Instead of the predicted 7.2 percent real salary increase, which would have been the highest in the world, staff in Argentina have seen the largest real decreases in wages, with the buying power of salaries down 11.6 percent.

In 2019, local staff in Argentina are once again forecast to receive the highest nominal salary increases in the world but are expected to see the buying power of their salaries drop by 8.7 percent, the worst predicted for any country.

Turkey, heavy borrowing, loose monetary policy, poor relations with the United States, the imposition of sanctions by the Trump administration, and President Erdogan’s undermining of the independence of the central bank, have all contributed to the country’s currency crisis.

Since January 2018, the lira has lost more than 34 percent of its value against the dollar, spelling a difficult time for locally employed staff in Turkey. Despite salaries rising by 9.5 percent, among the highest increases in the world, continuing inflation in the wake of poor economic performance has seen average salary decrease of 5.5 percent for staff in real terms. In 2019, the situation is expected to deteriorate further, leading to a nominal increase forecast of 10 percent, but slightly higher inflation means that forecast real terms salary decrease of 6.7 percent are expected.

Countries in the AsiaPacific region dominate the rankings of highest forecast salary increases; 14 of the top 20 countries in the list, and all but one of the top 10 are Asia-Pacific locations, with Ukraine the only other country to claim a place. Low inflation and higher productivity mean that economies, and therefore local salaries, are growing rapidly in the region. The average real increase is forecast to be 2.7percent, down slightly from 3 percent this year but still considerably more generous than the global average of 1.2 percent.

Unsurprisingly, given its status as the world’s fastest growing economy, India, ranked third for real salary increases this year, is forecast to see real salaries rise by 5.1 percent in 2019. Vietnam and Indonesia, two other rapidly expanding economies, complete the top three and China, ever-present within the top 10 of forecast increases, ranks fourth.

Staff in other emerging markets are not anticipated to be as fortunate as those in Asia, with local employees in Argentina, Turkey, Nigeria, Egypt and Algeria all forecast to receive real salary decreases again next year.

It is not only emerging markets like Argentina or Turkey that are characterised by unpredictability. With the date for Britain’s withdrawal from the European Union set as March 29, 2019, employers and staff alike will be closely monitoring the situation in the United Kingdom over the coming months. In 2018, on the back of lower than expected inflation, real salary increases at 0.4 percent, though low, were double those predicted by last year’s survey. However, the impact of Britain’s exit from the EU remains uncertain.

The deal that Theresa May’s government has negotiated with the EU 27 if it is altered, or at worse, a lack of any deal at all, may have significant and wide-ranging implications for both inflation and salaries. Currently, nominal salaries are expected to remain relatively stable, up 0.1 percent on 2018 to 3 percent, but lower inflation forecasts mean an anticipated real salary increase of 0.8 percent.

Relatively low inflation means the rest of Europe looks set to maintain its 2018 real salary growth of 0.8 percent, with staff in Russia and Ukraine, benefitting from significantly lower inflation, set to receive the largest real increases in the region by a considerable margin at 2.3 percent and 2.7 percent, respectively.

Globally, despite the uncertainty, the forecast picture for most countries is one of stability.

Average nominal salary awards are expected to remain steady at 4 percent against a real median increase of 1.2 percent, slightly lower than 2018’s figure of 1.3 percent.