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Jun 5, 2009, 7:34 GMT

Estonian inflation hits zero

Tallinn - Inflation in the recession-hit Baltic state of Estonia effectively disappeared in May, latest figures reveal. According to Statistics Estonia, the consumer price index fell by 0.3 per cent in May 2009 compared to May 2008 and was zero compared to April 2009. 'The decrease of the consumer price index compared to the same month of the previous year was fixed for the first time in Estonia,' Statistics Estonia said. Price rises on items such as alcoholic drinks and tobacco, largely as a result of increased tax duty, were offset by decreases in fuel costs. Inflation has dropped sharply since June 2008 when it peaked at 11.4 per cent. In 2008, Estonia became the first European Union member state to enter a technical recession. The data means that Estonia is likely to face deflation in coming months as the economy continues rapidly to cool off. Danske Bank's Baltic analyst Violeta Klyviene told the German Press Agency dpa that deflationary pressure could cause problems in the wider economy. 'In general the drop in economic growth is very sharp and very deep, so we believe there will be a deflationary situation at least for this year,' she said.

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