Estonia inflation drop keeps euro bid on track

Mar 5, 2010, 11:50 GMT

Tallinn - Estonian consumer prices fell by 0.1 per cent year-on-year in February, according to data released Friday by the Baltic state's statistics office.

The figures mean Estonia's bid to become the next European Union member state to adopt the euro on January 1, 2011, remain on track, as the inflation level is well within the boundaries set by the Maastricht criteria governing euro adoption.

January's figure was a 0.7 per cent reduction in prices.

The rising cost of motor fuel was a major factor behind a smaller than anticipated price drop, the statistics office said.

Finance Ministry spokesman Kristjan Pungas said inflation for 2010 as a whole was expected to be 'modest' at around 0.4 per cent.

'In comparison annual inflation in the euro area amounts to 0.9 per cent according to latest estimates,' Pungas said.

On March 4 the Finance Ministry issued a statement saying Estonia also easily met the Maastricht rules on the size of permitted budget deficits.

'The current estimate for 2009 is that the size of the deficit was around 1.7 percent of GDP, which is considerably lower than the Maastricht criterion of 3 per cent,' the statement said.

Finance Minister Jurgen Ligi said that while Estonia's deficit was among the smallest in the EU, it would eventually need to be turned into a surplus.

'Public sector expenditure continues to exceed revenue and this situation can not continue for a long time,' he said.