Tag: inflation

Myanmar's economic crisis

From Power Struggles to People’s Plight: The True Cost of Myanmar’s Power Play 

Written by Kai Donesa on . Posted in Uncategorized.

Birches Group closely monitors labor markets that are making headlines worldwide, keeping you updated on trends and developments. 

In Myanmar, a Southeast Asian nation brimming with hope for democracy, a brutal reality continues to grip the country. A February 2021 military coup d’état overthrew opposition leader Aung San Suu Kyi and her elected government—returning Myanmar to authoritarian rule, shattering years of progress toward democracy, and plunging the country into a relentless power struggle. 

While the world’s attention has focused on the political turmoil, mass displacement, and human rights abuses, another tragedy unfolds. Three years into military rule, the junta has once again extended the state of emergency for another six months. Sadly, Myanmar’s people continue to endure the worst of the crisis. 

This headline article goes beneath the surface of violence and unrest in Myanmar, exploring how the coup has devastated the country’s economy. 

Shifting tactics: Junta faces renewed resistance 

Since seizing power in February 2021, Myanmar’s military junta has faced unwavering opposition. The Global Center for the Responsibility to Protect reports that hundreds of thousands of citizens have joined peaceful protests and strikes against military rule. The International Crisis Group also reports, “Some of the country’s ethnic armed groups have gone on the offensive, and new forms of armed resistance by civilian militias and underground networks have emerged.” 

The past five months have seen a shift in both the military’s tactics and the nature of resistance. The government has been rapidly losing ground to rebel forces in several regions of Myanmar. In late October 2023, an alliance of three ethnic armed groups launched a coordinated attack against the regime, posing the strongest challenge since the 2021 coup. 

Reuters reports that Myanmar’s junta is now “facing the fiercest threat to its power since seizing control.” Collective campaigns targeting the military have emerged across the country, and the military’s control has been shaken, its resources strained, and the morale of its soldiers undermined. 

As it battles an unprecedented alliance of opponents while being weakened by internal dissent and defections, the military regime has escalated its crackdown on civilians. The junta has stepped up its increasingly brutal methods like mass arrests, forced displacements, and aerial bombardments. 

Analysts from the United States Institute of Peace, however, say that “There is simply no way back for an enfeebled and stretched junta that is rapidly losing its ability to control the public. Its airstrikes and arson attacks on civilian populations have only served to deepen the public’s commitment to resist.” 

This interplay between shifting tactics and renewed resistance paints a grim picture of Myanmar’s current situation, where the cost of the power struggle is borne by the increasingly desperate civilian population. Amid the escalation of the fighting, the United Nations (UN) reports that over 2.5 million people have been displaced by the armed conflicts. 

Yun Sun, a nonresident fellow of the Brookings Institution, comments, “Some Myanmar watchers believe that the balance of power may shift sufficiently to change the tides within the country or the military government.” Even though there have been some significant and strategic gains for ethnic armed organizations who have been working with increased cooperation, the conflict is ongoing with no obvious end in sight, says the UN Office for the Coordination of Humanitarian Affairs (UN OCHA) in its Myanmar Humanitarian Needs and Response Plan for 2024. The Economist Intelligence Unit further notes that while “the junta’s control has weakened substantially and now controls about 30-40% of Myanmar’s territory, it is unlikely to fall.” 

Kyat in crisis: Currency devaluation and eroding purchasing power 

The situation in Myanmar, fueled by the military junta’s desire to maintain power, has triggered a domino effect of consequences affecting the lives of citizens. The political turmoil has translated into a harsh reality of economic hardship, social unrest, and deepening poverty. 

Sanctions imposed by the international community, aimed at pressuring the junta, have crippled Myanmar’s financial system. Some countries have also suspended development funds and imposed embargoes, among other measures. While intended to isolate the military regime, these sanctions have choked the local economy. 

The World Bank notes that Myanmar’s economy has shrunk since the COVID-19 pandemic and the military coup, with economic activity remaining weak and constrained. In fact, it estimates the economy in 2023 to be 30% smaller than it might have been in the absence of the pandemic and coup. 

Trade and investment have dwindled. In its investment climate statement on the country, the United States (US) Department of State says, “The regime’s ongoing violence, repression, and economic mismanagement have significantly reduced Burma’s commercial activity.” 

The US State Department expounds that the Central Bank of Myanmar “has imposed severe foreign exchange restrictions that limit commercial activity and severely limits access to US dollars.” In its most recent economic monitor, the World Bank notes the presence of multiple exchange rates and a widening gap between the official and parallel market rates. 

Rising inflation adds another layer of hardship. Inflation and conflict are driving up the prices of essential goods, such as food and fuel, leaving vulnerable households in distress, says the UN OCHA in its January 2024 update on Myanmar. Additionally, a recent World Bank survey found that about half of the surveyed households reported a decrease in income over the past year. Oxfam adds that over 20% of the population still lives below the poverty line, pushing people at risk deeper into desperation. 

What our Market Monitor reveals 

In the wake of Myanmar’s ongoing political turmoil, concerns arise about its impact on the labor market. To understand this complex and multi-layered issue, we reviewed data from our Market Monitor reports for the past six months. Looking back at the period between 1 August 2023 and 1 February 2024, we wanted to shed light on how the crisis is affecting Myanmar’s labor market. 

Our Market Monitor reports show a significant increase in volatility and exchange rate movement since 1 December 2023, when Myanmar reentered our list of markets to watch at Level 3. Level 3 (out of six levels of volatility) suggests rapidly evolving market conditions and an exchange rate movement of 40% or more in six months. It also implies multiple salary reviews and revisions should be considered among the comparators of our salary surveys in Myanmar. 

In the 15 December 2023 edition of our report, Myanmar’s volatility level quickly rose to Level 4, remaining high since then. Level 4 suggests a sudden, unexpected social/economic event, a currency devaluation of 50% or more in six months, and a disjointed and unclear survey comparator response. Myanmar’s exchange rate movement sharply increased from 40% on 1 December 2023 to 63.3% on 15 December 2023. However, it has slightly decreased to 62.9% since 1 January 2024. As of 15 February 2024, our latest edition, the exchange rate movement over the past six months has further declined to 61.4%. 

How Birches Group can help 

The situation in Myanmar is still fluid, and its future uncertain. We at Birches Group urge readers to pay close attention to the country’s political climate. The ramifications of Myanmar’s economic crisis extend far beyond news headlines. Understanding the current situation and its socioeconomic impact is crucial for organizations operating and managing their workforce in Myanmar. 

Staying informed requires ongoing monitoring. We encourage you to subscribe to our Market Monitor reports for bimonthly updates and analysis. Our latest edition (15 February 2024) focuses on Myanmar as a case study for developing special measures amid volatility. 

Moreover, registering for our salary surveys will equip you with the most recent data on compensation and benefits in Myanmar, allowing you to maintain responsible HR practices during these grim times. 

Birches Group is committed to providing you with the latest insights and resources to navigate this crisis. By staying informed and using reliable data, we can minimize the negative impact of this ‘forgotten emergency’ on the lives of Myanmar’s citizens. Subscribe to our Market Monitor and register for our compensation and benefits surveys today. 

References:

Argentina's Peso Crisis

Navigating Volatility: A Closer Look at Argentina’s Peso Crisis

Written by Kai Donesa on . Posted in Uncategorized.

Birches Group monitors labor market trends making headlines worldwide, ensuring you are updated on the latest developments.

On 14 August 2023, the Argentine government took the bold step of hiking interest rates and decreasing the value of its currency. This intervention came a day after the country’s primary elections, adding a layer of uncertainty and volatility to Argentina’s economic landscape.

Unexpected timing

After far-right and anti-establishment candidate Javier Milei obtained the most votes, the results sparked a sell-off of the Argentine peso, shares, and bonds. Anticipating a market backlash, the Banco Central de la Republica Argentina (BCRA) devalued its currency by 20% (to AR$350 per dollar) to reassure jittery investors. The Buenos Aires Timesreports that the devaluation was the largest in a single day since December 2015. The BCRA said the move would help cushion “exchange rate expectations and minimize the repercussion on prices.”

The BCRA added that the peso would be held at AR$350 per dollar until the general elections in October. But many news outlets and think tanks say the devaluation leaves the official exchange rate far from the parallel market rate, which is AR$690 per dollar.

Reuters cites that the financial markets had been betting on a solid performance by a more moderate political candidate. Bloomberg reports that Milei, a representative and economist, supports dollarizing the economy. Riding on a wave of popular discontent, Milei has also called to liberalize the economy, vowed to abolish the central bank, and advocated for sharp spending cuts.

“Investors like Milei’s economic message but fear the execution and institutional risk, considering his lack of power and aggressive style,” a chief Argentina strategist at a financial services company told Bloomberg. “Milei represents uncertainty,” a fixed-income strategist at an investment management firm shared.

With negative international reserves, inflation at over 120%, poverty at 40%, and tight capital controls among its many economic woes, Argentina faces fresh uncertainty ahead of the October elections.

Argentines feel the impact

The recent drop in the peso’s value has affected ordinary Argentines, worsening already high inflation and making everyday life more challenging. The prices of essentials have skyrocketed, putting a strain on household budgets. In fact, consumer goods companies have increased their prices by nearly 10%, further stretching purchasing power.

To make matters worse, supermarkets have confirmed that the supply of goods has been disrupted, making it harder for people to find and afford the necessities they rely on.

Additionally, the devaluation of the peso is expected to have a ripple effect on gas prices, as oil companies expect their costs to rise. This means that Argentines will also face higher prices for transportation and utilities.

Due to economic hardship, the savings of many Argentines have further eroded. The cost of living has reached crisis levels, making it increasingly difficult for people to meet their basic needs. There are concerns that, if the situation worsens, the country could face hyperinflation.

What our Market Monitor says

Our Market Monitor report offers a sobering analysis:

1 January to 1 June 2023. During the first half of the year, Argentina alternated between Levels Two and Three (out of six levels of volatility), with an average exchange rate movement of 39.9%. Level Two shows dynamic market conditions and an exchange rate movement of over 20% in the past six months. On the other hand, Level Three shows rapidly evolving market conditions and an exchange rate movement of over 40% in the past six months.

15 June to 15 August 2023. From 15 June to 15 August, Argentina climbed to Level Three with an average exchange rate movement of 44.8%.

1 September onwards. Beginning on 1 September, Argentina’s level of volatility rose to Level Four. This level of volatility reflects a sudden, unexpected social or economic event (i.e., the peso devaluation, among other factors) or a currency devaluation of at least 50% in six months. In the case of Argentina, the exchange rate moved by 74.4%.

Our latest salary surveys report that many organizations still denominate salaries in Argentine pesos, keeping the South American country at Level Four.

How Birches Group can help

Argentina’s peso crisis underlines the importance of developing a Special Measures Policy in response to economic instability. Such policies can help protect your organization and employees from economic shocks.

If your organization grapples with the effects of market volatility and needs help formulating a clear Special Measures Policy, our consultants are here to assist you. With their extensive experience and in-depth understanding of emerging labor markets like Argentina, they can provide you with the tools and advice you need to navigate these uncertain times.

References:

An aerial view of a city with buildings and a river.

The Impact of Devaluing the Nigerian Naira

Written by Kai Donesa on . Posted in Uncategorized.

Birches Group keeps an eye on labor market trends that are making headlines across the globe, ensuring you are up to date on the latest developments.

On 14 June 2023, the Nigerian naira lost a staggering 25% of its value compared to the previous day, macroeconomic intelligence provider Focus Economics reported.

The sharp devaluation was caused by the Central Bank of Nigeria’s decision to allow the naira to fluctuate freely, letting market forces determine the exchange rate. The Central Bank also implemented several reforms, including scrapping the segmentation of its foreign exchange market. For six years, the local exchange rate was held artificially low and changed little.

A welcome, bold start

Following his inauguration on 29 May 2023, President Bola Tinubu hit the ground running with a string of sweeping changes. He noted Nigeria’s monetary policy needed “thorough house cleaning” to help the economy become more competitive. Within his first three weeks in office, Tinubu embarked on some of the most radical reforms in decades:

Petrol subsidy removal. By ending its longstanding petrol subsidy, the Nigerian government is projected to achieve fiscal savings of nearly 4 trillion naira (US$5.10 billion) in 2023. These savings are expected to reach over 11 trillion naira by the end of 2025.

Suspension of Central Bank governor. On 9 June 2023, Tinubu suspended Central Bank Governor Godwin Emefiele following divisive policies. During Emefiele’s term, a black market for foreign exchange thrived.

Reforms in the foreign exchange market. Foreign investors have flagged Nigeria’s foreign exchange restrictions as an obstacle to investing. The move towards a more unified and market-responsive exchange rate will foster a stable economic environment and prevent the dollarization of the economy.

According to Reuters, Tinubu inherited anemic economic growth, record debt, and shrinking oil output. However, he has promised to put the economy back on track and asked Nigerians to support painful decisions. The speed of his decisions took many by surprise.

Short-term pain vs. long-term stability

Every day Nigerians are feeling the brunt of the government’s economic shakeup. The Guardian reports that, while Tinubu’s policies please foreign investors, the devalued naira means ‘national sacrifice mode.’ People are feeling the strain as their new president pushes through the widely unpopular policies. Living costs have further increased.

The currency devaluation is already pushing prices amid a significantly higher foreign exchange rate, cites Africanews. This change will cause considerable short-term pain but will correct the economy, say economic analysts. Nevertheless, Nigeria continues to face rising inflation and increased poverty rates, pressuring the government to address concerns.

On a positive note, the recent changes are considered a welcome development. The floating exchange rate is expected to strengthen investor sentiment and bring in much-needed capital. Observers have described the transition as a “window of opportunity” that could have a transformative impact on millions of Nigerians.

The steps have fired up markets, sending stocks in Africa’s largest economy to their highest level in 15 years. For its August 2023 Nigeria economic outlook, professional services firm PwC reported that the positive investor sentiment drove up the market capitalization of the stock exchange by 9.3%. “Just the fact that you have seen quite a bit of movement in a relatively short space of time has gotten a lot of people in the market excited,” Goldman Sachs economist Andrew Matheny told Reuters.

In a statement, the World Bank said, “The recent removal of the petrol subsidy and the foreign exchange management reforms are critical steps to address long-standing macroeconomic imbalances and have the potential to establish a solid foundation for sustainable and inclusive growth.” “Deepening and sustaining these changes is imperative to enable Nigeria to break out of the cycle of macroeconomic instability, low investment, sluggish economic growth, escalating poverty, and fragility.”

The World Bank expects growth in Nigeria to increase: “While inflation will be higher in 2023, it will be lower in 2024 to 2025 if the right policy mix is sustained.” The creditworthiness and investment profile of the country is also expected to improve.

Bismark Rewane, Chief Executive Officer at Financial Derivatives Company, a Lagos economic think tank, told Reuters, “What we are seeing is the removal of distortions created by inefficient pricing of foreign exchange and in the next few weeks we should start seeing the naira finding its level.” Business Insider Africa says that market participants and stakeholders are closely watching the effects of these significant changes.

What our Market Monitor indicates

In early July 2023, Nigeria entered our list of potentially volatile labor markets at Level Four (of six levels). Level Four shows signs of a sudden, unexpected economic event, as well as a devaluation of the local currency by at least 50% in six months or less. According to the 15 August 2023 edition of our Market Monitor report, the naira dropped as much as 67% in the past six months.

Although this significant devaluation could classify Nigeria at a higher volatility level, our latest salary survey reports that most organizations still denominate salaries in the naira, keeping Nigeria at Level Four for the time being.

Organizations in Nigeria should remain vigilant and closely watch the ever-evolving economic landscape. Staying attuned to shifts in labor market trends, exchange rates, and government policies is imperative to make informed decisions. By being keenly aware of these factors, you can adapt strategies and ensure the sustainability of your business in Africa’s most populous nation.

How Birches Group can help

Get insights into what to consider when your organization develops special policies in response to volatility. Published in English, Spanish, and French every two weeks, our Market Monitor report examines the labor market conditions of over 150 countries for signs of potential volatility.

Subscribe to our biweekly Market Monitor today. Download the 1 and 15 July 2023 editions of our report, where we focus on how you can manage the situation in Nigeria.

References:

Egypt Inflation

Egypt’s Surging Inflation: What is Happening and How Employers Can Prepare

Written by Kai Donesa on . Posted in Uncategorized.

Birches Group reports on the current state of labor markets that are making headlines around the world, bringing you up to date on the news.

Egypt, Africa’s third-largest economy, has been battling inflation for almost a year. Supply chain issues and tight financial conditions have also made Egypt vulnerable to external shocks.

Egypt’s inflation rose to 26.5% in January 2023, up from 21.9% in the previous month and 8% in January 2022. Steve Hanke, an economist at Johns Hopkins University, estimates the actual inflation rate to be 101%.

A currency crunch

The crisis began in February 2022 with Russia’s invasion of Ukraine. The conflict has severely affected Egypt’s economy. The country saw food and energy prices soar. Its tourism industry, which relies on Russian and Ukrainian visitors, further declined. Foreign investors also pulled out over US$20 billion in investments. The Egyptian government responded to the flight of capital by restricting imports. Inflation, which was at 8% the month before, entered the double digits zone at 10%.

With dwindling foreign currency reserves and teetering on the brink of an economic collapse, Egyptian authorities turned to the International Monetary Fund (IMF) for aid in March 2022.

A new IMF loan

After several months of meetings and negotiations, Egypt and the IMF reached a staff-level agreement in October 2022. (The loan agreement was approved by the IMF’s Executive Board in December 2022 but only publicly published in January 2023.) The IMF would provide a support package totaling US$ 3 billion in exchange for implementing several economic reforms, including:

  • Liberalizing the exchange rate,
  • Raising interest rates by 2%, and
  • Scaling back the economic role of the state and military.

The support package would be gradually given to Egypt within four years, subject to periodic reviews. The IMF loan is also expected to catalyze another $14 billion in funding from international and regional partners.

The shift to a flexible exchange rate

One of the IMF’s conditions for its latest loan was to liberalize the exchange rate. With a permanent shift to a flexible exchange rate, the Egyptian pound’s value would be determined by forces of supply and demand rather than set by the central bank.

To comply with the IMF’s terms, the Central Bank of Egypt (CBE) announced in October 2022 the shift to a flexible exchange rate. The CBE has since been devaluing the Egyptian pound in phases. Since the end of January 2023, it has been trading at above EGP 30. The Egyptian pound lost over half of its value in less than a year.

As a result, the depreciating pound has been fueling inflation and adding to the woes of Egypt’s 106-million population.

An economic crisis

Egypt’s fiscal measures have strained its citizens, especially the poor and middle class.

Egyptians are feeling the pinch. Many imported products are unavailable, and food staples have doubled in price. Tens of millions of people cannot afford basic staples, limiting their spending. Families have been cutting back on meat, medicine, and clothing.

Citizens are complaining about their income shrinking. More middle-class Egyptians have turned to charities for support.

In an opinion piece for Middle East Eye, former investment minister Yehia Hamed cites that nearly 70% of Egyptians believe the government is “doing too little to meet people’s need for an acceptable standard of living.”

How is the government responding

According to the World Bank, the government announced various measures to help alleviate the impact of higher prices on the vulnerable. These measures include revising the minimum wage, delaying adjustments to electricity prices, and extending existing food subsidies and cash transfers. The government has also opened outlets where food is sold at lower prices.

But conditions are still problematic. Poverty is elevated in Egypt: roughly 1 in 3 Egyptians live below the poverty line, according to official figures as of 2020.

What analysts say

The immediate outlook for the Egyptian pound is more challenging, says S&P Global. Experts predict that, over the next 3 to 12 months, the Egyptian pound will trade at 32 to 35 pounds against the dollar.

Analysts also predict that inflation will continue to rise in the short term. The World Bank (WB) forecasts Egypt’s inflation to remain double-digit until the fiscal year ends in June 2023. WB also notes that economic activity and real incomes are expected to be adversely impacted.

What our Market Monitor indicates

Egypt has been on our Market Monitor report since its first publication in mid-June 2022. From mid-July to September, the North African country was at Level Two for two months. Level Two reflects dynamic market conditions where there has been a movement of over 20% in the exchange rate in the past year.

In October, Egypt was dropped from our list of volatile labor markets as the movement in the local exchange rate fell below 10%. Nonetheless, we continued to examine the Egyptian Pound’s exchange rate movement against the US Dollar. Egypt reentered the list in November and remained at Level Two until early January 2023.

In mid-January 2023, Egypt’s level of volatility jumped from Level Two to Level Four. As of the time of writing, Egypt’s exchange rate movement for the past six months is 59.2%, showing sudden and rapidly evolving conditions.

How Birches Group can help

Employers in Egypt should keep a close eye on the local situation, as rapid economic events can drastically impact business continuity.

As inflation rises, organizations must respond proactively to the emerging crisis. In the 15 February edition of our Market Monitor report, we highlight Egypt as a case study of what organizations can do in a turbulent market. Join our mailing list today to learn about our recommendations for special measures in Egypt and other volatile labor markets.

References:

The Zimbabwe Labor Market: A Fragile Economy 

Written by Kai Donesa on . Posted in Uncategorized.

Birches Group has been keeping track of the volatile economic conditions in Zimbabwe and wants to share updates on the current labor market conditions there.  

Waning trust in local currency 

Al Jazeera reports that Zimbabwean authorities are struggling to pull the Southeast African nation from the grip of a severe economic crisis characterized by a rapidly devaluing local currency. Trust in the Zimbabwean dollar (Zimdollar) has been low after people saw their savings depleted by hyperinflation in 2008. Our July 2022 salary survey of the Zimbabwe labor market notes that the economy had dollarized between 2009 and 2019. 

Although the Zimdollar was reintroduced in February 2019, it continues to be sidelined in favor of the United States dollar (USD). Businesses and individuals see the USD as more acceptable overseas and better at holding long-term value. Because the Zimdollar became untradeable outside the country, employers were required to start paying salaries in USD.  

Local media outlets such as NewsDay have confirmed that demand for USD salaries has increased across economic sectors. In an opinion piece for New Zimbabwe, African affairs expert Teresa Nogueira Pinto writes, “There are now increasing fears that the country will experience another hyperinflation crisis as in 2008.”  

An exceptional situation 

Our Market Monitor categorizes labor market conditions according to six levels of volatility. Since mid-July, Zimbabwe has been classified as Level Five, indicating a prevailing practice to denominate salaries in USD or Euros. In our most recent salary surveys of the country, we have further noted that employer participants across sectors (including the NGO sector) now denominate and pay salaries in USD. This includes cash and in-kind benefits. 

However, our latest surveys indicate little to no market movement since February. We have not observed any activity in our multi-sector salary survey. But as of July 2022, we have seen minimal movement in our NGO salary survey: pay rates for support-level staff increased by 1.9% and at the professional or managerial level by 0.2%. Nevertheless, inflation has continued to soar in the triple digits since May. The Reserve Bank of Zimbabwe, the country’s central bank, reported an annual inflation rate of 256.9% in July from 191.6% in June. 

Next steps for employers 

It is vital to have policies and procedures to keep pay programs functioning and maintain business continuity in countries like Zimbabwe, where the labor market is unstable. A Special Measures Policy should be established to determine the triggers for updating salaries and benefits. In addition, organizations must decide how they plan to implement the next steps for their staff. Employees need to know that they can rely on their employer to assist them during times of crisis.

How we can help 

We at Birches Group have extensive expertise in developing Special Measures Policies for organizations across different markets and sectors. Contact us today to find out how we can create one for you. 

References:

Sri Lanka Economic Crisis: What You Must Know About the Current State of Affairs

Written by Bianca Valencia on . Posted in Uncategorized.

Birches Group has been monitoring the volatile economic conditions in Sri Lanka and wants to provide updates on the current labor market conditions happening in the South Asian nation. 

The past few months have not been easy for Sri Lanka, and the condition has only worsened. The country has been facing economic, political, and social crises due to the impact of the COVID-19 pandemic, rising foreign debt, and a depreciating rupee. According to a news report from BBC, the country’s inflation rate is now at 54.6% as of June 2022. Our August 1 Market Monitor shows that the exchange rate movement against the US dollar, Euro, British pound, and West African CFA franc in the past six months is at 79%. Moreover, after protests forced President Gotabaya Rajapaksa to flee to the Maldives and Singapore, Sri Lanka is in a state of emergency. 

Losing skilled talent 

These are challenging times for employers and staff in the South Asian island nation. It has been noted that there is an increasing number of skilled and educated Sri Lankans—from IT experts to hospitality and marketing professionals—who want to work overseas, where they can maximize the rupee’s devaluation and survive hyperinflation. According to Manusha Nanayakkara, the minister of labor and foreign employment, almost 168,000 Sri Lankans have registered to work abroad. Many intend to work in the Middle East, particularly in Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates (UAE). An independent survey conducted in November 2021 by the country’s Institute for Health Policy reveals that 1 in 4 Sri Lankans wanted to emigrate if they had the opportunity. This ratio has increased to 1 in 3 in July 2022.  

Compensation in Sri Lanka and the Middle East 

Our July 2022 multi-sector survey indicates that compensation ranges in Middle Eastern labor markets are significantly higher than in Sri Lanka. Our survey results show that the average annual salary ranges for support staff at Birches Group Level 6 in Sri Lanka receive a minimum of US$ 5,810 and a maximum of US$9,896, while a senior professional at Birches Group Level 10 receives a minimum of US$ 14,246 and a maximum of US$ 23,517. In Kuwait, support staff at Birches Group Level 6 would be paid approximately seven times more, between U$ 48,054 and US$ 76,418, while a senior professional at Birches Group Level 10 would receive between US$ 108,420 and US$ 153,708. As the chart above indicates, the figures are even higher in the UAE, Saudi Arabia, and Qatar. 

Next steps for employers 

Birches Group’s Market Monitor categorizes labor market conditions according to levels of volatility, with Level One as the lowest (reporting standard market conditions and market movement between 0–20%) and Level Six as the highest (where the country has reported labor market collapse, departure of most comparators from the market, and absence of reliable data on currency and inflation). In our most recent Market Monitor, Sri Lanka is now at Level Four, where labor market conditions reflect sudden, unexpected social or economic events, currency devaluation of 50% or more in six months or less, and there is disjointed and unclear comparator response. When the labor market becomes volatile, such as what we are seeing in Sri Lanka, organizations should place policies and procedures to keep pay programs functioning and to maintain business continuity. 

To avoid losing skilled employees leading to brain drain, organizations in Sri Lanka must address the situation by establishing a Special Measures Policy. Through the Special Measures policy, employers can define the appropriate triggers within labor market conditions that warrant a change or update in salaries and benefits. These triggers, in turn, outline what organizations will do to help cushion the impact of hyperinflation on their people.   

How can we help 

We at Birches Group have extensive expertise in developing Special Measures Policies for organizations across different markets and sectors. Contact us today to find out how we can create one for you. 

References: 

  • 1 August Market Monitor Report 
Ghana’s Cost of Living Crisis: What You Need to Know

Ghana’s Cost of Living Crisis: What You Need to Know

Written by Bianca Valencia on . Posted in Uncategorized.

Birches Group has been keeping an eye on economic conditions in Ghana and wants to provide updates on recent developments in the West African nation. 

One of West Africa’s more prosperous countries has been rocked by a cost-of-living crisis. Inflation in Ghana reached 29.8% in June 2022, the highest level in two decades. The Guardian reports that food prices have risen by 30.7% since last year, and energy costs have sharply climbed. Transportation costs have also gone up. 

Our August 1 Market Monitor further indicates that the Ghana cedi has seen an exchange rate movement of 34% against the US dollar, Euro, British Pound, and West African CFA Franc in the past six months. As inflation persisted and broadened, hundreds took to the streets of the capital Accra to protest the deteriorating economy. 

President Nana Akufo-Addo has stressed that the economic challenges the country is facing are the effect of the COVID-19 pandemic and the war in Ukraine. The government is seeking a support package from the International Monetary Fund (IMF), which visited Ghana in July. In a July 13 statement, the IMF said that such adverse developments “have contributed to slowing economic growth, accumulation of unpaid bills, a large exchange rate depreciation, and a surge in inflation.” 

What the labor market indicates 

The Ghanaian labor market exhibits rapidly evolving market conditions. Birches Group’s Market Monitor categorizes labor market conditions according to levels of volatility, with Level One as the lowest (reporting standard market conditions and market movement between 0–20%) and level six as the highest (where the country has reported labor market collapse, departure of most comparators from the market, and absence of reliable data on currency and inflation). In our latest Market Monitor, Ghana is classified as Level Three, where there are rapidly evolving market conditions, movement of more than 40% in the last 12 months, and multiple reviews and revisions are typical amongst comparators. While the surge of inflation has been swift in the country, labor market data has not moved as fast.  

Based on our salary survey analysis, no labor market movement was observed in July 2021.  

The chart above shows labor market movement in Ghana against reported inflation rates from July 2021 to July 2022 based on Birches Group’s multi-sector salary survey. As seen in the chart, labor market movement significantly increased in 2022, but inflation rates have always been much higher and moved at a faster rate from 2021. We believe this is because inflation or the cost of living is not directly proportional to the cost of labor. 

Next steps for employers 

When labor market conditions become volatile, such as in Ghana, organizations should establish policies and procedures to keep pay programs functioning and maintain business continuity. Through a Special Measures Policy, organizations need to determine the appropriate triggers based on labor market conditions that demand an update in salaries and benefits. Organizations must also decide how they plan to implement the next steps for their staff. Employees need to know that they can count on their employer to assist them amid the burgeoning crisis. 

How can we help 

We at Birches Group have extensive expertise in developing Special Measures Policies for organizations across different markets and sectors. Contact us today to find out how we can create one for you. 

References: 

  • 1 August Market Monitor Report 

Webinar – Managing Compensation in Volatile Economies

Written by Bianca Valencia on . Posted in Uncategorized.

Birches Group and The HR Partners held a Webinar on March 2, 2016 on the subject of “Managing Compensation in Developing Economies.”  If you were unable to join us, or just want to listen to the content again, you can watch a video of the full webinar below.

Date:  Wednesday, March 2, 2016
Time:  9:00 (New York) / 12:00 (São Paulo) / 14:00 (London) / 16:00 (Johannesburg) / 18:00 (Dubai)

Watch the Webinar Recording:

Download the Presentation

Download the Questions and Answers