TALLINN - The pain of the Baltics' inflationary shackles did not ease in May, as the consumer price indices in all three countries ticked up a few tenths of a percentage point on higher fuel and food prices.
Latvia's annual inflation, the steepest in the EU, reached 17.9 percent, its 12th straight monthly gain and the highest level in 11 years.
Compared with April, consumer prices were up 0.9 percent on higher fuel and vegetable prices.
In Lithuania, annual inflation hit 12 percent, up from 11.7 percent in April. Fuel prices alone jumped 3 percent over the month of May.
Lithuania now has the third highest inflation in the 27-member EU, after Bulgaria.
Finally, in Estonia, inflation grew at an annual rate of 11.3 percent last month, slightly higher than in April. Month-on-month prices were up 0.6 percent.
Estonia's result raised questions about the much-anticipated drop in consumer prices that analysts have been predicting for several months.
Estonian analysts said soaring oil prices have cast a dark cloud over the country's economic outlook. In the words of SEB Pank's Ruta Eier, "a slowdown in the pace of inflation is not in sight."
"The very rapid increase in oil prices and growth in world food prices are the main factors driving inflation, and the growth looks set to continue in the near future. The latest developments rather indicate poorer inflation outlooks," Eier said.
Annika Paabut, an analyst at Hansabank Markets, said it was clear that food and commodity prices on world markets, coupled with the rising price of motor fuel, were negatively affecting Estonian consumer prices.
"A new price surge lies ahead in the second half of the year judging by information released by the competition board. At the same time there is the continued impact of the rise in motor fuel prices, which will probably spread to other goods mainly through an increase in transport costs," she warned.
The Bank of Estonia expects inflation to reach 9.8 percent this year, but for this to happen external inflationary pressures would have to recede, the bank said in a statement.
Lithuanian analysts are also predicting a second surge of price increases later this year.
"With crude prices growing continuously, we do not have too much hope to see the trend of consumer prices going down. Lithuania, same as other Baltic countries, is dependent on the imports of energy resources, which has a big effect on prices even if the economic growth is slowing," Violeta Klyviene, senior Baltic analyst at Danske Bank, said.
The Baltics' inflationary woes began in early 2007 after years of intense economic activity. The price spiral was later intensified by processes on world commodity markets, a trend that is continuing to the present and shows no sign of letting up.
All analysts expect inflation to begin subsiding by the end of the year, especially considering that the economies are slowing 's they only disagree how fast. But with global energy prices skyrocketing, the much-needed slowdown may come later than sooner.
