Inflation Was the Year’s Lowest in December

 

There were no significant price changes in December. In comparison to November, there was a slight rise in food and fuel prices which were compensated by discount offers on alcoholic beverages. Food prices were affected by a rise in meat product prices, which is in accordance with price developments in foreign markets.

 

In 2011, prices rose 5 per cent, which is close to the last forecast by the Ministry of Finance (4.9 per cent) issued in the summer. Last year, the rise in prices was mostly led by foreign factors. Of commodities, the prices of food and oil products were spurred on in the first half of the year by a rapid global economic growth, along with a growing demand in developing countries. In the autumn, the impact of commodity prices began to decrease, wherefore inflation began to gradually slow down. At the same time, higher salaries and employment levels have enabled internal demand to recover, increasing the impact of domestic factors on inflation.

 

As expected, adopting the Euro had a small impact on prices . The single impact on inflation is estimated at 0.2-0.3 per cent, which is similar to the experience of other countries that have adopted the Euro.

 

A temporary acceleration in annual inflation may be expected in January due to rising housing expenses. Annulment of the sales tax in Tallinn should somewhat lessen its effects. Inflation will return to its deceleration trend thereafter and the rise in prices in 2012 will reach around 3 per cent. This is facilitated by a weak foreign environment and instability, which will decrease the effects of foreign factors even further.

 

Additional information:
 
Rainer Laurits
Public Relations Department
Ministry of Finance of Estonia
Phone +372 611 3035
GSM +372 556 10991
E-mail: Rainer dot Laurits at fin dot ee