Estonian finance ministry: Inflation should decelerate to below 20% by the end of 2022

Even though input prices going up in Estonia is likely to be reflected in the prices of products and services becoming more expensive in the coming months, inflation will soon be curbed by a strong reference based from a year ago, as a result of which inflation should slow down to less than 20 per cent by the end of the year, according to Kristjan Pungas, an analyst at the fiscal policy department of the Estonian finance ministry.

Compensation measures for high energy prices and the establishment of a universal electricity service enabled consumer prices to decline 1.1% in monthly comparison and, compared with a year ago, the price hike decelerated to 22.5%. Inflation continued to accelerate in the euro area, meanwhile, reaching 10.7%, according to preliminary assessments.

“As the exchange prices of electricity and natural gas have decreased from their high levels this summer, the impact of energy [price] mitigation measures proved somewhat more modest in October. The price drop has been facilitated by European gas reserves having been filled more rapidly than expected, measures taken to reduce consumption and weather having been warmer than usual,” Pungas said.

Euro coins painted in the Estonian tricolour. Picture by Shutterstock.

Food prices continue growing

As to other components in the consumer basket, similarly to earlier months, a relatively broad-based continued price growth was registered.

“The increase in food prices expedited to 28 per cent in October. Inputs have become significantly more expensive for food producers and they have not been able to fully pass it on to their final prices. It means that pressure remains for continued growth of food prices,” the analyst noted.

Pungas pointed out that growth in the price of services sped up to 13 per cent, largely due to cost pressures.

“As energy is an important cost component, water supply prices grew nearly 20 percent. In addition, services related to various leisure and sports activities have become more expensive in recent months,” he added.

In August, Estonia’s inflation hit 25% year-on-year, the highest inflation in the eurozone.

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