Consumer prices rose by 4.8% in total last year. Inflation held high in the first half of last year, but it started to fall from the autumn and will continue to do so this year.

Various taxes contributed around 2% of inflation last year. The vehicle registration tax that was introduced a year ago raised the inflation rate by 1.2 percentage points, and the rise in VAT to 24% in July added 0.7 percentage point. Inflation was also affected to a lesser degree by rises in excises. Without the effect of tax rises, the inflation figure for Estonia that is used in comparisons with other European countries was 3%, which is similar to the rates in Latvia and Lithuania. The rate of inflation in Estonia without the effect of taxes then fell to the euro area average of 2% in the closing months of the year.

A notable feature of last year was that the rise in prices of several food commodities on global markets passed steadily through into retail prices, and inflation for food products was quite high at over 6%. Meat products that particularly rose in price were chicken and beef, while the price of pork, which is the largest share of meat consumed, remained the same as in the previous year despite an outbreak of swine fever at Estonian farms in the summer. This indicates that some of the domestically produced pork was replaced by more competitive imports.

The appreciation of the euro meant that prices fell for several manufactured goods that are mostly imported from Asia such as electronics and clothing. Prices also fell for energy, especially prices for transport fuels, which were pulled down both by prices falling on the global market and by tighter competition between Estonian fuel retailers.

Inflation will fall further in 2026 and Eesti Pank estimates that it will be close to 3% for the year. VAT was raised in July 2025, and that tax change will consequently keep inflation over the year higher until July this year. The increases in excise on tobacco and alcohol in January will continue to inflate prices.

Price trends for food commodities will tend to ease inflation pressures. Commodities prices have stopped rising on the global market and they started falling last year for some commodities like cocoa, coffee and butter that had pushed retail prices up. This trend may be expected to appear in retail prices in shops as well.

Oil is cheaper on the global market than it was at the start of last year, and so prices for motor fuels will for the time being remain lower than they were last year. Electricity being more expensive will push inflation higher in the beginning of this year though. January was warmer than the average last year, but is forecast to be close to that average this year or colder than it. Electricity was consequently more expensive in the first week of the year, as the price was a fifth higher than it was last January.

The uniform level of tax-free income that applies from the start of this year will give households around 700 million euros extra this year. Although this amount will be added gradually during the year, it will still push inflation up when it is used for consumption. Confidence among households has increased a little but it still remains low. Consumers are also being choosy after their recent experience of inflation, and that will again make it harder for merchants to raise their prices.

Further information:
Hanna Jürgenson
Communications Specialist
Eesti Pank
Tel: 5692 0930*
Press enquiries: [email protected]