Inflation in Estonia seems to be running higher than is the case in Latvia and Lithuania, SEB Pank analyst Mihkel Nestor says.
Inflation in Estonia ran at 4.2% YoY in February, a significant rise, though between January and February, perhaps a more useful comparison than the year-on-year, derivative-of-a-derivative figure, there was little change.
Nestor pointed out that inflation had almost halted in the other two Baltic States, Latvia and Lithuania.
He said: “We are looking particularly interesting compared with countries comparable with us, i.e. Latvia and Lithuania, where inflation has almost stopped.”
The fall in energy prices may in time equalize the situation in Estonia, however. “Against this background, energy prices still exert the biggest difference. If you take a look at the price of electricity on the Nord Pool exchange, it has fallen substantially, but this has not been reflect in the CPI.”
Over the past year, healthcare, including hospital services and dental care has risen in cost by almost 10%, while alcohol and tobacco products have also increased in price, by 9%. Clothes and footwear rose in price by 4.4% and food by 3%.
Part of this can be put down to the hike in VAT, more properly speaking a sales tax (Kaibemaks), by 2%, to 22% at the start of this year, along with a rise in alcohol and tobacco excise duties.
But this is not the whole story.
“If you look at other components which do not exert such a big influence on the index, e.g. clothes and footwear, maybe some household goods have seen price rises. It appears that it has been easier to raise prices in Estonia, than has been the case in Latvia and Lithuania. Here price rise more rapidly,” Nestor went on.
Furthermore, the majority of households were still consuming electricity at universal price levels, Nestor said. While this service was introduced at the peak of the high energy prices, since then, exchange prices have fallen below that level. Since the universal price service ends in May, a further fall in energy costs which will be passed on to inflation figures should be expected. (ERR/Business World Magazine)
