Inflation for the whole of 2024 was 3.5%, of which 1.6% came from the rise in consumption taxes. Without the rise in taxes, inflation last year would have been around 2%, or similar to the average in the euro area. Consumer prices were 3.8% higher in December than a year earlier, but at the same level as in November.

Prices for services and food rose fastest in Estonia in the second half of the year. The increase in the price of coffee and juice in global markets passed much more sharply through to shop prices in Estonia than it did in the other countries in the euro area. Prices have by now stopped rising for those food commodities, but the price level has remained high, and that will affect inflation in the coming months. Services prices have largely been driven up by the rise in prices for telephone and data communications that started last spring. Prices for medical services, including dental care, have also continued to rise. Prices for labour-intensive services have been pushed up by relatively fast wage growth.

Falling prices for energy helped limit the rise in consumer prices to some extent, as electricity from the exchange and motor fuels cost less on average than they did in 2023. Sales of cars jumped up at the end of the year as the introduction of the vehicle tax from the start of this year encouraged people to move their purchases of cars into 2024. This increase in purchases did not raise the prices of cars particularly though.

Inflation in Estonia’s neighbours last year was around 1% in Lithuania and 1.3% in Latvia. Prices for services, particularly transport and communications services, rose more in those countries than they did in Estonia. Prices for food products, which are the largest part of the consumer basket, were essentially unchanged in Lithuania last year. Energy prices also came down a little faster in Latvia and Lithuania than they did in Estonia.

Inflation in Estonia will again be shaped by tax policy this year. The effect of the rise in VAT at the start of 2024, which drove inflation last year, will disappear in January this year. However, the vehicle tax introduced from the start of 2025 and the rise in alcohol excise will have an impact. There will also be a rise in VAT to 24% in the middle of the year, and excise on diesel fuel will increase. In total, Eesti Pank is forecasting that inflation in 2025 will be 4.3%. It would be a little below 3% this year without the tax rises, and inflation in the whole of the euro area is expected to be close to 2% this year.

Additional information:
Hanna Jürgenson
Communications Specialist
Eesti Pank
5692 0930
Email: [email protected]
Press enquiries: [email protected]