Swedbank: Inflation close to 20% in Estonia

SwedbankConsumer prices rose more than expected in April. Prices grew by 18.8% year-on-year and 3.6% month-on-month. Inflation accelerated due to the end of government’s energy subsidies on electricity, gas, and central heating in March. Ukrainian refugees lifted rental prices, which rose by as much as 12.5% in a month. Inflation was previously as rapid in September 1996.

Estonia’s annual increase in consumer prices was the fastest in the euro area. In Estonia, the share of energy and food in the consumption basket is higher and the price increase faster than in the euro area. In Estonia, the share of energy costs in the consumption basket is 16% and in the euro area 11%, on average. On average, 19% of the family budget is spent on food in Estonia and 15% in the euro area. In addition, the price index is also affected by different methodologies. For example, in Estonia, only the stock price is used in the electricity price data, disregarding half of the population who have fixed-price contracts.

As in previous months, prices were lifted by more expensive energy and food. Food has risen in price by 14.6% in a year. The prices of many food products have increased rapidly, including vegetables, fish, and dairy products.

Energy accounted for more than half of the increase in consumer prices. Electricity was 119%, heat energy 57.7%, and gas 237.2% more expensive than one year ago. Petrol was 32.5% and diesel fuel 48.6% more expensive.

Inflation will remain rapid in the coming months. The rise in prices is expected to slow down in the second half of the year due to base effects. The growth of both net wages and pensions is far below the rise in prices. Nevertheless, consumption growth has remained robust. Swedbank forecasts a 2% increase in private consumption this year.

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