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Estonian ministry: Annual inflation is on a downward trend

Kristjan Pungas, analyst at the fiscal policy department of the Estonian Ministry of Finance, said in his commentary on latest inflation data on Friday that a slowdown in inflation continued as expected in March, and that the last time before March 2024 when consumer prices rose by less than 4 percent on year was in the summer of 2021.

Figures published by Statistics Estonia in the morning show that prices in Estonia were 0.4 percent higher in March than in February, while annual inflation slowed from 4.2 percent in February to 3.9 percent in March. In the euro area, inflation was estimated to have slowed to 2.4 percent.

“In March, price levels were raised by an increase in the prices of communication services and seasonal price changes, such as the ending of discounts for clothing and the increase in the price of airline tickets. Most of the monthly price increase resulted from a 13 percent surge in the prices of mobile communication packages, which pushed consumer prices up by 0.3 percentage points. However, for some categories of goods, such as food and household goods, we saw a continuation of discounts,” Pungas said in a press release.

He noted that the annual increase in food prices slowed to 1 percent in March.

“The decline in producer prices for food and lower energy costs have contributed to this. Increases in food and manufactured goods prices subsiding also contributed to the deceleration of inflation in the euro area. The rise in the prices of services has accelerated here since the beginning of the year, boosted last month by the aforementioned telecom packages. However, due to the weak economic environment, accommodation prices and rents have declined, being 12 and 5 percent lower respectively than a year ago,” said Pungas.

The analyst pointed out that in April, the impact of the energy price relief measures that ended last spring will be gone from inflation data. In addition, for seasonal reasons, a certain reduction in the price of electricity can be expected in the spring and summer months, which will cause a decline in energy prices.

“It will be somewhat dampened, however, by the rise in oil prices to a five-month high due to geopolitical factors, which will be more visible in retail prices for April,” he said.

The Ministry of Finance estimates inflation in Estonia this year to hit 3.4 percent and to slow down to 2.5 percent in 2025 as the impact of tax measures  decreases.

Source: BNS

(Reproduction of BNS information in mass media and other websites without written consent of BNS is prohibited.)

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