Shoppers at Rimi stores have long been cautious about the future, according to the retailer's purchasing manager, with customers primarily cutting back on sweets, snacks and ready-made meals. The planned 2-percent VAT hike will be gradually passed on to customers.

"From July 1, we'll implement the price increases on food products over the course of a couple of weeks," said Rimi purchasing manager Marilin Jürisson, adding that the increases won't be uniform. "Competition also plays a role in how much and which products are affected. Some items will go up a bit more, others a bit less."

According to LHV economic analyst Triinu Tapver, the tax hike will most directly affect food prices, as the sector has not performed well lately.

"This is the product group that's struggling the most. We're seeing that food sales in the first half of the year have dropped by around 20 percent compared to the beginning of last year," Tapver said.

"At the same time, if you look at the profits and profit margins of these same retailers, it's clear the first quarter was also very difficult for them. So I don't really believe they'll be able to absorb the VAT increase — it will be passed on to consumers," she added.

Car owners won't find much comfort in the start of July either, as fuel prices are set to rise for two reasons.

"Unfortunately, there's no good news," said Terminal board member Alan Vaht. "The gasoline excise duty is going up, which adds 3.5 cents per liter. On top of that, the VAT increase adds another 2.6 cents. So in total, that's 6.1 cents more per liter. Diesel is in a slightly better position — its excise duty won't increase."

The VAT hike will also accelerate inflation. On average, store prices are expected to rise by about 1.6 percent, but past experience shows that actual increases tend to be higher. LHV is forecasting annual inflation of 6 percent.

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