(adds Finance Ministry, central bank)
TALLINN, April 7 (Reuters) - The rate of price rises in recession-hit Estonia slowed faster than expected in March to 2.0 percent year-on-year, data showed on Tuesday, and the Finance Ministry saw euro inflation goals being met this year.
Inflation hit a peak of 11.4 percent year-on-year in April 2008, but the statistics office said it had fallen to 2004 levels in March this year.
The country has been hit by recession and the economy shrank 9.7 percent year-on-year in the fourth quarter of last year. The government expects a drop of 8.5 percent this year.
The Finance Ministry said in a statment that "recent developments show that fulfilling the Maastricht inflation criteria is real in the fourth quarter of this year".
Estonia wants to adopt the euro at the start of 2011. With inflation rapidly easing, its main problem is set to be keeping its budget deficit with the EU limit of 3 percent of GDP.
The statistics office said consumer prices fell 0.5 percent month-on-month in March and rose 2.0 percent year-on-year.
The March inflation figures were below the median forecast in a Reuters survey of a year-on-year reading of 2.65 percent. The year-on-year rise in the previous month was 3.4 percent after a fall of 0.3 percent in the month.
The Finance Ministry said the falling trend in prices would be replaced by an increase in prices in the summer.
The ministry expects annual average inflation this year of 0.4 percent, sharply down from 10.4 percent in 2008.
The statistics office said that inflation was last below 2 percent in April 2004, when it was 1.3 percent.
The statistics office said that in March the year-on-year consumer price index change was mainly influenced by a 19.9 percent rise in the price of alcoholic beverages and tobacco, and by a 10.2 percent price decrease in the price of transport services, including a 23.3 percent drop in motor fuel prices.
The monthly price drop was mainly due to a fall in the price of heat energy by 7 percent, as well as falls in rental prices, special sales of cars and milk and diary product price falls.
The central bank said it expected prices to continue to fall in the coming months, but not as quickly. (Reporting by David Mardiste; editing by Stephen Nisbet)