According to Statistics Estonia the country’s consumer price index rose 0.5% in September, when compared to August. The consumer basket cost 3.8% more than in September 2011. Inflation remained unchanged in September compared to August, whereas according to Eurostat’s preliminary estimate the euro area inflation accelerated from 2.6% to 2.7%.

The rise in prices in September was primarily due to the increase in the prices of clothes, footwear, motor fuel and thermal energy. The price level of processed food has remained relatively stable in recent months. However, in the final months of the year Estonia's food prices may be affected by several commodities, mainly cereals.

Estonia’s core inflation was slow in September, year-on-year (1.3%), because price pressures caused by services decreased somewhat during that period.

According to the Eesti Pank’s summer forecast inflation will be 3.9% in 2012 and 3.2% in 2013. In 2013 the price level will increase owing to a great extent to the rise in the price of electricity in January (a rise of almost 20% for consumers). The direct contribution of rising electricity prices to consumer price inflation in 2013 will likely be 0.7 percentage points. At the same time the prices of other goods and services will also increase due to the rise in companies’ production costs. Their contribution to inflation may reach 0.2 percentage points. The rise in electricity prices will dampen economic growth because it will reduce the real income of households and thereby slow down the growth of consumption and domestic demand.  Poorer economic outlook will cause the decrease in investment and in demand for labour.

In the next few years competition in the electricity market will increase, but during the opening of the market it will be relatively weak because technical options for importing electricity from the Nordic countries will remain limited also in 2013. In an environment of limited competition it is important that the state increases the efficiency of the functioning of the electricity market. In addition, as the sole owner of Eesti Energia the state should ensure that the enterprise does not use its market power to raise the prices too much. 

For futher information:
Ingrid Mitt
Eesti Pank
Public Relations Office
Eurosystem
Telephone:+372 668 0965, +372 512 6843
E-mail: [email protected]
Media queries: [email protected]