Data from Statistics Estonia show that prices were 1.9% higher in July than a month earlier, with inflation over the year reaching 22.8%. Energy prices were 87% higher than a year earlier, accounting for around half of overall inflation. Prices of food, including alcohol and tobacco, were up 17%, while prices of services were up 12% and those of manufactured goods were up 11%.

Household consumers will probably be able to buy energy at a lower price this winter, as the new government plans to compensate them for the part of the cost of energy. Housing costs for households will probably not rise as sharply in the coming heating period as they did last autumn. This means that inflation will be a little lower at the end of the year.

Businesses will have to cope with record high energy prices. The price of natural gas will continue to reach new peaks in Europe and threatens to be much higher than it was last year. Natural gas is an important input in electricity production and in production of food and construction materials. The high price of electricity means that businesses in Estonia will find it harder to compete in the Nordic countries, where electricity has recently been cheaper.

Slower growth in the economy will start to rein back the surge in inflation. Growth in retail sales and industrial output has slowed in recent months. It is harder for businesses to raise prices as the economy cools, as their budgets come under greater pressure and those facing difficulties need to cut costs. The rate of inflation may be expected to slow more generally next year.

For further information:
Viljar Rääsk
Head of Communications
Eesti Pank
5275 055
Press enquiries: [email protected]