Estonia's inflation reaches 11 percent

  • 2008-02-13
  • By TBT staff
TALLINN - Estonia's consumer price index crossed into double-digit territory and reached 11 percent in January, maintaining the country's dubious honor of having the second worst inflationary record in the EU.
Statistics Estonia announced on Feb. 8 indicated that prices for goods increased 10.2% over the 12-month period ending in January, while those for services jumped 12.6 percent.

Inflation was mainly powered by gains in food prices, housing and motor fuel. For example, prices for foodstuffs, the largest weighted element in the index, soared 14.3 percent.
Housing costs, which comprise 14.4 percent of the consumer price index, jumped 3.7 percent in January compared with December.

January prices were up 2.2 percent compared with December.
Martin Lindpere, an economist with the central bank, said the monthly inflation had been led by rises in excise duties on motor fuel, alcohol and tobacco as was expected and by rising food prices.
In his opinion, the double-digit inflation is temporary. As Estonia's economy is showing signs of cooling off, prices will soon follow.

"Although inflation will be of the same order in February and March, we'll see the start of the falling trend afterwards. At the end of the year inflation will be growing at a considerably slower rate," Lindpere predicted.
Hardo Pajula, an analyst with SEB Eesti Uhispank, said the acceleration of inflation that started in the last quarter of 2007 is in keeping with global developments.
Similar jumps have been recorded in consumer price indexes of the United States, Sweden, countries of the euro zone and other countries, Pajula stressed.
"We assume that the global price pressure will weaken in the second half of this year when the initial impact of the rises in food and fuel prices wears off and the overall cooling of the economic climate starts curbing demand," he said.

"The impact of the coming drop in overall demand will be more significant in the Baltic states. Even now the pace of growth of major money saving instruments, for instance, is slowing very fast," he observed.