Swedbank: Effects of Middle East war gradually reaching Estonia

TALLINN - The effects of the war in the Middle East are gradually reaching Estonia, Swedbank's senior economist Liis Elmik said on Friday in a comment on consumer prices.

Prices increased by 0.4 percent in May compared to April, and by 3.7 percent year-on-year. Energy and travel became more expensive, while food prices decreased.

"Negotiations to end the war in the Middle East and reopen the Strait of Hormuz are ongoing, and the price of oil remains volatile. In May, the price of gasoline rose slightly, while the cost of diesel fuel fell, the latter influenced by the switch to cheaper summer-grade fuel. The price of gas increased by a fifth in May. Over the last three months, motor fuels have risen in price by 23 percent and gas by 30 percent," Elmik noted.

The rise in motor fuel prices led to an increase in transportation costs. In May, prices for bus, plane, and ferry tickets went up. Train tickets became cheaper as Elron lowered the prices of season passes. This price reduction is aimed at halting the decline in the number of train passengers.

The start of the tourist season pushed up the cost of holiday packages, airline tickets, and accommodation. Travel remains popular, with a record number of people passing through Tallinn Airport in May.

Grocery stores ran numerous sales campaigns in May to boost sales. Compared to April, the prices of vegetables, fish, butter, and confectioneries decreased.

Swedbank forecasts inflation of 4.3 percent for this year. "Next year's price increase should remain around three percent. The largest contributors to inflation this year are rising energy and transport costs," Elmik said.