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Oil pushing up inflation expectations.

TALLINN - Estonia's Finance Ministry raised its 2012 inflation forecast

for Estonia as oil prices exceed its estimates, reducing its outlook for consumer-price growth in 2013, reports Bloomberg. Inflation will probably average 3.3 percent this year, compared with a September forecast of 2.8 percent, the ministry, based in Tallinn, said on April 3 in a new economic outlook. Consumer-price growth may slow to 3 percent next year, compared with a previous estimate of 3.1 percent.

Rising oil prices are triggering upward revisions to official inflation forecasts, Finance Minister Juergen Ligi said in March. Growth in the $19 billion economy may slow to 1.7 percent this year from 7.6 percent in 2011, the European Union's fastest pace, as the euro region's debt crisis saps export demand, Ligi said. It may quicken to 3 percent in 2013, he added.

The principal factors for price growth in March were tobacco products and motor fuels, stated economist of the Bank of Estonia Orsolya Soosaar, reports Postimees Online. In her March consumer price index comment, Soosaar noted that the prices of tobacco products were affected by higher excise tax rates that entered into force in January. "The growing petroleum prices could have been among the factors that caused plane tickets to become more expensive," she added.

According to Soosaar, the base inflation that mostly reflects domestic price pressures remained at 2 percent in March in the year-on-year comparison. Falling communications services prices continued to be an important factor.

The Bank of Estonia noted that the strengthening of the pricing pressure originating from the labor market was apparent in the real estate sector.

According to the Statistics Board, the March consumer price index grew by 1 percent in comparison with February, and by 4.4 percent in comparison with March 2011. According to flash estimates, the euro area inflation rate decelerated to 2.6 percent.

Price growth in the year to February averaged 5 percent, the second fastest rate in the 27-member EU behind Romania.

Persistently high global fuel prices affect Estonia more than most European countries because of its lower incomes and northern location, according to the central bank and the Finance Ministry.

From wire reports
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Title Annotation:Finance
Publication:The Baltic Times (Riga, Latvia)
Geographic Code:4EXES
Date:Apr 11, 2012
Words:365
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