NordenBladet – According to Bank of Estonia Deputy Governor Ülo Kaasik, inflation in Estonia has not risen notably since last August and is expected to slow down to single-digit levels in the second half of 2023. The decrease in inflation is due to the drop in energy prices and the price of oil and natural gas, while food prices will continue to rise. The real estate market has also sensibly settled.
The European Central Bank (ECB) has raised interest rates to slow inflation in the euro area, and Kaasik noted that the monetary policy had reacted firmly. He said that “there are no good ways to tackle inflation that has gotten too high, so we have to choose between bad and worse, and inflation remaining high for too long would be the most harmful outcome for people and for the economy as a whole.”
“The Bank of Estonia expects inflation to come down and approach a more normal level in the second half of this year,” Bank of Estonia Deputy Governor Ülo Kaasik said at the recent annual conference of the Estonian Economic Association (EMS).
The deputy governor also acknowledged that difficult times will continue for the Estonian economy, but the outlook is better for the second half of the year, with government spending supporting demand in the domestic market and growing company profits. The ongoing war in Ukraine is expected to impact Estonia’s economy more strongly this year, but Kaasik noted that the number of people employed in the Estonian economy is at a near record high. He stressed that the significant budget deficit is a feature of Estonia’s state finances and additional spending requires additional revenues.
Featured image: Ülo Kaasik (NordenBladet)