Since the annual inflation rate stood at 3.5 percent in November, price growth accelerated in December.

Bigbank's chief economist Raul Eamets said the 4 percent price increase was driven by both the rise in value-added tax (VAT) and last year's increase in the cost of living which led to a nominal wage increase of around 8 percent.

"This year, we can expect similar developments, as VAT is increasing further, and additional excise duty hikes are on the way. Given that the labor market remains relatively strong, wages are expected to grow by around 6 to 7 percent. Therefore, a price increase in the range of 4 to 4.5 percent can also be expected," he noted.

Luminor's Chief Economist Lenno Uusküla said the annual inflation rate reaching 4.1 percent in December indicates that, on average, prices rose by about 0.3 percent each month in 2024.

"Inflation was higher at the beginning of the year when VAT was raised, and for the rest of the year, prices grew by an average of 0.2 percent per month," Uusküla said.

He also highlighted that prices in 2024 were 3.7 percent higher on average compared with the previous year.

"This means that to afford the same basket of goods, people needed to earn an additional €3.70 for every €100. However, since the average wage growth was higher than 3.7 percent, life improved slightly for most wage earners last year."

Although the annual inflation rate of 4.1 percent is lower than in the previous three years (12.0 percent in 2021, 17.5 percent by the end of 2022, and 4.3 percent by the end of 2023), Uusküla noted that this still represents a significant price increase.

"Inflation in the euro area is lower, and our neighboring countries — Latvia, Lithuania, and Finland — have also had lower price increases compared with Estonia," he said.

Statistics Estonia will publish the final consumer price index for December on January 8, which will also reveal how much prices rose in total last year.

In December 2023, Estonia's inflation rate was 4 percent, while consumer prices rose by 9.2 percent for the whole of 2023.

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