Inflation of 0.6% in February was mainly driven by energy prices, as price rises in the rest of the consumer basket remained slow.

Electricity prices were up 27% on the year and raised inflation by 0.9 percentage point. Cold weather in February meant that the exchange price of electricity in Estonia was at its highest of the past decade. The high price of carbon dioxide quotas is an obstacle to the production of electricity from oil shale, and so Estonia has been importing electricity from the Nordic countries. Markets expect the exchange price of electricity to adjust by the start of summer. Energy prices make up 12% of the consumer basket in Estonia, which is a larger share than the average of 9% in the countries of the euro area, and so fluctuations in the prices of electricity and oil are felt more strongly in Estonia.

Food prices were a little lower in February than a year earlier. Looking forward it should be noted that food price inflation on global markets has not yet reached the European Union domestic market and food prices could rise in the future.

Domestic price pressures remain relatively weak in Estonia as wage growth has slowed and the economy is not running at full capacity. Service price inflation will increase in the second half of the year, but the rapid spread of the virus may postpone that. Eesti Pank forecasts that inflation for 2021 will be 1.4%.

Additional information:
Ingrid Schmuul
Communications officer
Eesti Pank
Tel: 668 0965, 5697 9146

Press enquiries: [email protected]