Analytics, Estonia, EU – Baltic States, Inflation, Markets and Companies

The Estonian central bank expects the inflation rate to accelerate in the second half of 2014, as the decline in energy prices will come to an end and growth in food prices is expected to accelerate.

The principal reason why in the year-on-year comparison, consumer prices in June fell slightly was the fact that electricity prices were by 13% lower. In June last year, electricity prices in Estonia were at their highest level ever due to temporary restrictions in production capacities in Baltic States due to disruptions in production. This year in June, on the other hand, the price level of electricity was one of the lowest in the history of electricity exchange in Estonia. The overall price level was also lowered by smaller prices of fruit and vegetables and of communications services.

The Bank of Estonia estimates that 2014 price growth rate will be 0.8%.

Kristjan Pungas, Analyst at the Fiscal Policy Department of the Ministry of Finance estimated that the inflation rate of 2014 will be lower than the ministry had projected in its spring outlook, writes LETA/Postimees Online.

“The year-on-year price change will stay close to zero during coming months, but will begin accelerating gradually with the arrival of autumn,” said Pungas. He added that the changes will depend, among other things, on the further price dynamics of foodstuffs.

“Due to a cool beginning of summer, the crops here and elsewhere in Northern Europe might suffer, thus increasing the prices of local garden crops,” estimated Pungas. “Prices of foodstuffs this autumn will also be affected by the low comparative basis from last year,” he added.

In its spring outlook, the Ministry of Finance predicted that Estonia’s inflation rate in 2014 would be 1.4%.