What Does Estonia’s Falling Inflation Rate Really Mean for Investors and Traders?

  • 2023-12-04

The latest news reports confirm that Estonia has dropped out of the list of Eurozone’s highest inflation rates in the second half of 2023. The rate of 15.6% through to March this year was more than twice the average across the EU and put the county behind only Hungary and Latvia, but what does the recent fall from this position really mean for Estonian investors?

The Latest Data

According to the official statistics agency of the European Union, known as Eurostat, Estonia’s inflation rate slowed in March to 15.6%, following on from 17.8% in February.  Reports from the Bank of Estonia then confirmed that it fell from 11.2% in May to 9.2% the following month.

More recent reports state that the average Eurozone rate fell to 4.3% in September while the overall EU inflation rate is now 4.9%  Estonia has managed to get below those averages, with a current figure of 3.9% putting the country just behind Lithuania (at 4.1%) and ahead of Latvia (with 3.6%).

The Effect on the Markets

One of the major financial news stories at the time of writing is the current jump in the Dow Jones index with over 100 points added on each of several days signalling a significant rise in value. According to analysts, this stock index rose partly because of hopes that inflation is waning, which is due to factors such as companies being more confident of meeting profit targets if inflation is low.

The Dow Jones is one of many indices listed by the CFD trading platform, Libertex, that can be researched by traders. This long-running index offers trading possibilities as it covers 30 of the biggest American companies - when inflation is low traders may be more likely to look for ways to gain from rising stock prices across the board by trade in an index like this. When inflation is high or rising, the likes of CFDs become more attractive, as they offer potential possibilities whether prices swing up or down.

The OMX Tallin All-Share Gross Index doesn’t contain globally-famous stock like the Dow Jones, but the effect of changing inflation rates on stocks in the Tallin Stock Exchange is likely to be similar. This means that investors can use the varying interest rates to work out when to invest and what to invest in.    

The Prospects of Companies Investing in Their Growth

Low interest also offer the ideal scenario for corporate investment, which is why the central banks sometimes lower their rates to stimulate business growth. This should mean that the falling rates in Estonia help to encourage businesses to invest more in the future.

In fact, Invest Estonia has recently been once again named at the top of the list of countries classified by Emerging Europe according to their national investment promotion agency’s work. It’s the fourth year in a row that Estonia has topped this table and that, combined with the falling interest rates, should mean that corporate investment keeps growing.

The swings in interest rates that we’ve seen in the last year or so have had an effect on many aspects of the country’s economy and that’s why so many people are keeping a close eye on what happens next.