2012-01-09 - Inflation in the Baltics easing down (MatasM)
Inflationary pressure in the three Baltic economies has weakened by the end of the year, reflecting deteriorating consumer confidence, spreading uncertainty and higher base. Average inflation (not harmonised) stood at 4.1% in Lithuania , 4.4% in Latvia and 5% in Estonia . The annual inflation in December was again smallest in Lithuania (3.4%), it dropped sharply in Estonia to 3.7%, while prices in Latvia by the end of 2011 were 4% higher than a year ago.
In 2012 the key factors behind higher inflation will again be stemming from administrated prices, rather than from the expanding demand. Commodity prices are expected to remain volatile through 2012, even despite rising spare capacities, while gradually fading inflation will allow for loose monetary policy. Improved outlook for 2013 is likely to revitalize economic sentiments and add to higher prices by the end of 2012.
Assessment: We expect consumer prices to ease further in all three Baltic countries in 2012. Nonetheless, loose monetary policy will feed in prices of commodities which will support inflation in the Baltics bringing it to the level higher than the EU average.
Jekaterina Rojaka
Chief economist
