Data from Statistics Estonia show that consumer prices were down 0.8% over the year in December. The consumer basket fell in price by 0.4% on average over 2020.

The year 2020 will go down in history as the year of the coronavirus pandemic. The economic contractions in countries in Europe were the largest of recent decades despite the measures taken by governments to ease the impact of the crisis and the large-scale intervention of the central banks of the euro area. The economic impact of the coronavirus crisis in Estonia was much less destructive than was estimated in the spring using the information that was available at the time. Prices also fell by less than was expected in consequence, as the central bank had forecast in spring that prices would fall by 1.1%.

The fall in prices in Estonia was still one of the largest in the countries of the euro area, and prices started moving downwards as early as April in Estonia. Prices for services proved particularly flexible, as rents and prices for accommodation services reacted relatively quickly and strongly. The crisis spread to transport prices more powerfully in the second half of the year. The fall in prices was also a consequence of price changes abroad. The oil price fell in 2020 from 64 dollars a barrel to 42 dollars, and oil futures were even trading at negative prices at the peak of the crisis. Inflation in the consumer basket was driven by food prices until the end of the year. It can equally be expected throughout this year that global prices for food commodities are more likely to rise, causing food prices to continue to increase.

Inflation in 2021 will be 1.4%, assuming that the coronavirus crisis eases in the first half of the year and the economy starts to recover. It should be noted though that the economic outlook in Estonia and worldwide is extremely uncertain because of the ongoing nature of the crisis.

For further information:
Mart Siilivask
Eesti Pank
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Mobile: 5697 9146
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