Estonia sees dip in consumer prices, inflation rate forecast at 9.4% for 2023

Estonia’s consumer prices witnessed a 0.4% decrease in October, marking a reduction in average price levels from September, primarily due to seasonal dips in food and tourism costs. The decline was majorly driven by a 3.9% drop in food prices over four months, despite an increase in meat and sweet prices. Other commodities such as motor fuels, household items, and entertainment also saw price reductions.

Electricity prices dropped significantly from €174 per MWh last year to €87 per MWh last month. However, rising prices are anticipated to elevate heating costs. The Bank of Estonia predicts an average inflation rate of 9.4% for 2023 but expects it to fall to 3.4% next year.

In addition to these fluctuations, Swedbank forecasts a nearly 10% price hike in 2023 and a 4% increase next year, with half of the anticipated price surge in 2024 attributed to the VAT hike and excise duties. Retail trade companies have already begun adjusting their prices in anticipation of the VAT increase.

Food cost declines might be limited due to recovering global food commodity prices. The consumer basket is currently about 30% more expensive than two years ago.

Despite the changes in consumer prices, wages and pensions have increased at least as much as prices. The deflation numbers for August were in line with expectations, but March saw an inflation rate of 0.9%.

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