The end of energy subsidy measures are responsible for the annual rate, Luminor's chief economist Lenno Uusküla said.

"While the annual inflation rate was 4.1 percent in March, this month-on-month decline is linked to the energy subsidy measures that ended in April last year. If there had been no new jump in inflation in Estonia, annual inflation would also have been below 3 percent," he said.

Half of the 3.3 percent inflation rate is connected to the VAT increase and other administrative changes in January this year, the expert explained.

However, the rest has been lower than the euro area inflation rate. This is largely due to the drop in energy prices, which affects Estonia's inflation more than the euro area's.

"However, given our economic downturn and compared to our price increases in other Baltic countries, our inflation is too high," Uusküla added.

"At the moment, they do not know what exactly was behind the price rise in April, but the big reasons are clear. The rise in services prices continues and has been lower than the rise in goods prices in previous years. With world commodity prices having also fallen back to some of their pre-high price levels, there is no reason for goods to be more expensive than services. However, as wage increases have been gradual and slower than price increases, the costs of services have also risen at a slower pace," the economist said. "As an example of this process, in April prices of some communication services rose, and prices of hairdressing services, for example, were also seen to rise."

Fuel prices were slightly more expensive again in April. "It has also been a good time to raise prices, as the rise in VAT has created a new confusion in prices, so consumers do not know what the right price for goods is," he added.

Estonia's April inflation above EU average

Eurostat's Euro area annual inflation flash estimate measured inflation at 2.4 percent in April, the same as in March.

Belgium (4.9 percent), Croatia (4.7 percent), Austria (3.4 percent) and Spain (3.4 percent) had the highest rates followed by Estonia (3.3 percent).

The lowest rates were in Lithuania (0.4 percent), Finland (0.6 percent), and Italy (1 percent).

Latvia's figure was 1.1 percent.

The main components of euro area inflation were services (3.7 percent), followed by food, alcohol & tobacco (2.8 percent), non-energy industrial goods (0.9 percent,) and energy (-0.6 percent). 

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