The Baltic states entered H2 2026 with sharply different inflation rates. Lithuania’s final July HICP inflation was 5.4%, while Eurostat’s latest flash estimates put Latvia at 2.5% and Estonia at 2.0%. In June, the respective rates were 5.4%, 3.3% and 2.0%. The July data therefore point to persistent rather than widening divergence.
For cross-country comparison, Baltic Focus uses HICP. National CPI data are used separately to examine domestic price structures and monthly movements.
Baltic inflation — July 2026
| National CPI | Lithuania | Latvia | Estonia |
|---|---|---|---|
| CPI, YoY | 5.9% | 2.6% | 2.2% |
| CPI, MoM | +0.2% | −0.7% | +0.5% |
| Food & non-alcoholic beverages, YoY | −0.3% | −3.1% | −1.6% |
| Housing & utilities, YoY | +15.1% | +6.8% | +8.3% |
| Transport, YoY | +12.5% | +4.8% | +5.4% |
Sources: State Data Agency Lithuania; Central Statistical Bureau of Latvia; Statistics Estonia.
Lithuania: stronger growth, broader price pressure
Lithuania combines the region’s highest inflation with considerably stronger economic momentum. GDP grew 3.8% year on year in Q2, supported by construction, trade, transport and manufacturing. In April–May, construction activity was almost 13% above the Q1 level, while Q2 retail sales rose 7.2% year on year, partly supported by household spending after withdrawals from second-pillar pension funds.
Against that background, national CPI reached 5.9% in July even as food prices declined. Housing and utilities were up 15.1%, transport 12.5% and services 6.5%. Stronger growth alone does not explain Lithuania’s inflation, but faster domestic expansion is currently coinciding with much broader price pressure than in its Baltic neighbours.
Latvia: food disinflation deepens
Latvia moved in the opposite direction. Annual CPI fell to 2.6% from 3.4% in June, while prices declined 0.7% month on month. Food was the main brake: food and non-alcoholic beverages fell 2.0% in July and were 3.1% cheaper than a year earlier. The VAT rate on selected staples — bread, milk, poultry and eggs — was reduced from 21% to 12% from 1 July.
The tax change strengthened the decline, but it was not the whole story. Swedbank notes that food prices had been broadly flat for around a year before beginning to fall, helped by favourable European food commodity trends, retail competition and a better first domestic harvest. The main counter-risk now comes from energy: higher gas costs could feed into electricity and heating prices later in the year.
Estonia: food and Nordic power hold inflation down
Estonia’s national CPI rose only 2.2% year on year. Eesti Pank identifies cheaper food as the main reason for the slowdown: the food basket was 1.6% cheaper than a year earlier, with fruit down around 11% and vegetables 4%.
Electricity provided another short-term offset. Prices fell about 4% from June, while cheap Finnish nuclear generation helped bring Estonia’s wholesale electricity price to around €44/MWh in July. Eesti Pank nevertheless warns that low Nordic hydro levels, autumn power-plant maintenance and agricultural risks in Southern Europe could restore some price pressure later in 2026.
Three inflation architectures
July extends the pattern Baltic Focus identified after Q2 rather than overturning it. Lithuania combines stronger domestic expansion with broad price pressure. Latvia is benefiting from deeper food disinflation, reinforced by the VAT cut, while energy risks remain ahead. Estonia is currently receiving relief from both food and favourable Nordic electricity conditions.
The result is a gap of roughly three percentage points between neighbouring economies that share the euro and are closely integrated through trade and energy markets.
How long can such an inflation gap persist inside the Baltic market?
July gives little evidence that convergence has begun.