1. Estonian Entrepreneurs’ and Consumers’ Price Expectations
Marje Josing ; Evelin Ahermaa
November 2005

2. Key words Joining the EU Entrepreneurs’ price expectations
Price Indices - changes

3. Price Changes – Entrepreneurs’ Plans (1) (next 3 months, BTS balances)
Increase
Decrease

4. Price Changes – Entrepreneurs’ Plans (2) (next 3 months, BTS balances)
Increase
Decrease

5. Price Changes – Manufacturing
Increase
Decrease
r=0,74

6. Price Changes – Construction
Increase
r=0,69

7. Factors Limiting Building Activity (% of enterprises)

8. Price Changes – Retail Trade
Increase
r=0,42
Decrease

9. Conclusions
Entrepreneurs’ planned to increase prices in connection with joining the EU
Price increase was accelerated before and stabilized after joining the EU

10. Consumers expectations
Inflation is historically very important and sensitive problem for Estonian consumers
Inflation perception evaluating strongly consumers household and general expectation
Consumers inflation expectations are weakly connected with purchasing expectations

11. Consumer price index (%, compared with last year)
*prognoses

12. Consumers price expectations and prognoses of households and general economic situation

13. Consumers price expectations and prognoses of major purchases (balances)

14. Inflation and joining with the EU
Joining with European Union increased inflation in Estonia
Before joining the question of prices was the most interesting and critical problem for Estonian consumers. Estonia joined with EU in May In April 2004 consumers expected that over the next 12 months Estonian prices will be 19,7 % higher (real HICP was 3,7%).

15. Consumers evaluations of prices over the last 12 months and HICP
Balance
HICP
Prices increase
Prices decrease
Joining with EU
r =0,72

16. Consumers prognoses of prices over the next 12 months and HICP
Balance
HICP
Prices increase
Shift 12 months
Prices decrease
Joining with EU
r = 0,45

17. Consumers prognoses of prices over the next 12 months and HICP
Balance
HICP
Prices increase
Shift 7 months
Prices decrease
Joining with EU
r = 0,68

18. Consumers price expectations (%) and real HICP (%)

19. Euro
Estonian government have a plan to join with euro-zone from 1-st of January
Main problem for Estonia - Maastricht agreement’s inflation criteria.
Estonian economy needs price convergence with EU market and Estonian fast economic development fosters inflation (real increase of GDP was 7,8% in 2004).

20. Price level indices of GDP (2002, PPP, EU15=100)

21. Change of GDP in Estonia (at constant prices, compared with previous year, %)

22. HICP and Maastricht criteria (%, Oct. 2004-Sept
HICP and Maastricht criteria (%, Oct Sept. 2005, 12 months avarage)
Criteria = 2,45