Prices in Estonia have eased for the second month in a row, and analysts expect the slowdown to continue next year even as the country still leads the euro area in inflation.
According to preliminary data from Statistics Estonia, prices in October stayed level with September. On year, the consumer price index (CPI) rose by 4.5%, keeping Estonia’s inflation rate the highest in the eurozone, Eurostat data showed.
Food prices have now fallen for two consecutive months – a major factor in the slowdown, as food makes up a large share of the consumer basket. Analysts link the drop to shrinking retail sales and fierce competition that’s pushing stores to roll out more discounts and promotions.
Rimi Estonia CEO Kristel Mets said the company had cut regular prices on several thousand products in recent months.
“In some categories, food prices have gone down, though unfortunately they’ve also risen in some others,” she said.
Prices for fruits and vegetables have dropped, boosting sales volumes, while pork prices have climbed.
Promotional activity, however, has remained about the same in both depth and scope, Mets adds.
Peeter Raudsepp, director of the Estonian Institute of Economic Research (EKI), said the growth of food prices easing offered relief to both the food industry and shoppers. He added that the trend also showed prices could move both ways.
“It’s not the case that once a price tag goes up in a store, it can’t go down again,” he said.
Swedbank chief economist Tonu Mertsina estimates average price growth this year at around 5% and expects it to slow to about 3% next year. More than 60% of this year’s inflation has come from food, healthcare and transport.
The effects of recent tax hikes are also fading, which should further ease inflation in 2026.
Raudsepp was more cautious, noting that Estonia had long stood out for its faster inflation compared with both the euro area average and its neighbors.
“It’s unrealistic to expect that to change overnight,” he said.
Mertsina added that while even 3% inflation still added to prices, the pace of growth was slowing.
“Net wages are rising much faster than inflation, which means purchasing power will improve in real terms,” he said. (ERR)