TALLINN — The Estonian consumer price index increased 0.4 percent in January compared to Dec. 2009 but but was still 0.7 percent lower than in Jan. 2009, according to the country’s department of statistics.
The index’s rise last month was mainly caused by the motor fuel price hike, influenced by the excise tax rise set by the government at the end of last year. Compared to Jan. 2009, the motor fuel rose by 36.9 percent, but compared to December the heating oil price took the highest rise by 18.1 percent.
Despite the increase, economists do not promise the improvement in the economic situation yet as the decline compared to last January shows that the demand is still weak, and that the price hike was also affected by the prices in the world markets. Estonia’s weak domestic demand in the wake of high unemployment, wage cuts and a gross domestic product in freefall dampened the price hike.
Swedbank analyst Maris Lauri pointed out that the energy prices were lower and many other items were cheaper.
“We cannot speak about the clear improvement in economy, but there is some kind of stabilization going on,“ Lauri told Baltic Reports. “In February the price level may somewhat decrease as the taxes will not be raised and due small demand, the salesmen cannot rise the prices.”
However, Lauri said that the traditional discount sales and electricity price hike and energy price rise in Tallinn will show some effect. The price dynamics will also be affected on what is going on in the world markets and the fluctuating values of the euro and American dollar.
Karel Lember, an economic analyst in the Ministry of Economic Affairs and Communications warned that this slight price hike does not mean the end of the crisis.
“The further fall is not expected in next few months as the alcohol and tobacco excise will reach up with a short delay due stock reserves,“ Lember told Baltic Reports.
Sander Klaos, director of department of analysis at Nordea’s Estonia subsidiary, said the minor fall compared to last January was expected and the small rise in consumer price index is insignificant, as changes from month-to-month can be affected by one-time factors and might not refer to the change in trend.
“Nordea prognoses that the changes in consumer prices will be on a negative side, which means that the consumer prices will continue to fall compared to the same period last year,” Klaos told Baltic Reports.
Klaos said that Estonia’s economy will continue the fall as well at least during the first part of the year, however the decrease will steadily slacken as the economy gradually recovers from last year’s catastrophic decline.
