Inflation slowed for the third consecutive month in July to 3.9 percent, but service prices continued to accelerate and are now the main driver of price growth, while citizens say they still don't feel any price reductions.
The inflation rate in Croatia, measured by the consumer price index, stood at 3.9 percent in July this year compared with the same month last year, the Croatian Bureau of Statistics reported on Friday. This continues the slowdown trend for the third consecutive month, after recording 4.5 percent in June, 5.2 percent in May, and 5.8 percent in April.
However, behind the encouraging figures lies growing pressure from service prices. According to the Croatian National Bank's commentary, services are the component with the largest individual contribution to overall inflation in July. Their annual growth rate accelerated to 8.5 percent, up from 8.1 percent in June, contributing 2.2 percentage points to the overall inflation of 3.6 percent as measured by the Harmonised Index of Consumer Prices (HICP).
The slowdown in overall inflation is largely attributed to a sharp decline in price growth for food, beverages, and tobacco. In July, this category rose by just 0.5 percent year-on-year (down from 1.8 percent in June), the lowest level since early 2021. On the other hand, energy prices continue to record double-digit growth of 12.2 percent (compared to 13.2 percent in June), while prices of non-food industrial goods excluding energy fell by 1.1 percent. Core inflation, which excludes volatile energy and food prices, slowed to 3.4 percent from 3.6 percent in June.
Deputy Prime Minister and Minister of Finance Tomislav Ćorić described the trend as "clear and encouraging." "The difference between Croatia and the eurozone average was 1.4 percentage points last month, and this month it fell to 0.7 percentage points," Ćorić said at a press conference. According to Eurostat's initial estimate, average annual inflation in the eurozone stood at 2.9 percent in July. The minister reiterated that the government's goal is for Croatian inflation to be at the eurozone average by the first quarter of 2027, adding that "inflation that is not at the eurozone level will then be talked about as a thing of the past."
Asked about domestic drivers of inflation, Ćorić acknowledged that some services generated by private initiative cannot be influenced, but stressed that the government has brought administrative prices and state spending under control. He also mentioned the announced tax treatment of excessive margins, which he believes is already having an effect by the mere announcement.
Despite the statistical easing of inflation, the situation on the ground is different. Citizens interviewed by Dnevnik.hr say they do not feel any price reductions. Daily life, they say, is becoming more expensive, with particular attention paid to rising prices in hospitality and retail. "Some shops and places I go to eat have raised prices," one citizen commented for Dnevnik.hr, illustrating the gap between official indicators and consumer perception.
Minister Ćorić also warned that it is impossible to project energy price movements. He noted that oil prices on global markets are currently around 15 percent lower than at the time of the new major escalation of the conflict in the Middle East, but a renewed flare-up at the end of July has already led to a significant rise in retail fuel prices. He also emphasized the importance of the tourist season for GDP and the price-quality ratio of the domestic tourism product.
