Estonian Inflation May Quicken to 4 Percent in 2011, IMF Says

Estonia’s inflation rate may accelerate to 4 percent this year because of rising global food and fuel prices, the International Monetary Fund said.

Core inflation should remain "subdued," the Washington- based lender said in a report on its website today. Consumer prices rose 2.7 percent last year, before the nation adopted the euro on Jan. 1.

The $19 billion economy, which in 2008 and 2009 shrank by almost a fifth in the second-worst recession in the European Union behind neighboring Latvia, will probably expand 3.6 percent this year after an estimated 2.4 percent increase in 2010, the fund said, reiterating a forecast it gave last month.

"Prices have surprised on the upside reflecting global food and fuel prices, the report said. "The key policy challenge that Estonia faces is to ensure that its economy remains on a sustainable growth path."

To contact the reporter on this story: Ott Ummelas in Tallinn at oummelas@bloomberg.net

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net