Estonia, Markets and Companies, Oil

In the past six months the price level in Estonia has fallen by 2.7% while the year-on-year price growth was 0.3%.

The Bank of Estonia noted that the inflation rate in the external environment is among the lowest ever; the price level in the Euro area was, according to initial estimations, by 0.6% higher in April than a year ago.

As a result of the strong economic contraction, the volume of reserves in the Estonian economy increased significantly last year. Lately, the reserves have probably not grown, but are still significant in the context of weak demand. Hence, pressure on lowering prices continues.

A big surplus of production of capacity in some economic sectors forces enterprises to produce at lower prices than they have thus far. Nevertheless, the confidence indicators have not continued the decline trend from the point of view of entrepreneurs and producers.

The falling prices of production inputs – such as of labor force – partially also carried into the prices of products, but it takes place during a lengthy period of time.

The Bank of Estonia predicts that on the average this year, the prices will fall by 0.5%. As the economic activity recovers, the price decline period will end as well.