Croatian Bureau of Statistics Reports Third Consecutive Month of Slowdown, but Energy and Services Continue to Rise, and the Public Doesn't Feel Prices Easing
Consumer prices in Croatia were 3.9 percent higher in July than in the same month last year, according to the first estimate of the Croatian Bureau of Statistics (DZS). At the same time, they fell by 0.2 percent compared to June. This marks the third consecutive month of declining inflation: in May it stood at 5.2 percent, and in June at 4.5 percent.
Finance Minister Tomislav Ćorić assessed the downward trend positively, noting that the gap with the eurozone average narrowed from 1.4 to 0.7 percentage points. "The trend is clear and encouraging, but we will not be satisfied until we bring inflation in Croatia down to the eurozone average," Ćorić told Tportal, adding that he expects convergence as early as the first quarter of next year.
Behind the latest figures lie pronounced increases in certain categories. Over the past year, energy prices rose 12.2 percent, services 8.5 percent, and food, beverages and tobacco 0.5 percent. Economic analyst Petar Vušković told Tportal that Croatia still has higher inflation than the EU average due to strong domestic demand, wage growth, high tourism service prices and higher energy prices. "We import part of the inflation, but we also create part of it ourselves through domestic economic conditions," he said.
He sees a particular risk in the recent fuel price hike and the announced increase in gas prices. "More expensive energy raises production, transport and service costs, so there is a risk of spillover to other prices. I do not expect a new strong inflationary wave, but more expensive energy could slow the further decline of inflation during the autumn," Vušković warned. He added that the business climate is turning for the worse for the first time, which will make the autumn challenging.
While statistics record a slowdown, many citizens on the ground claim the opposite. Net.hr collected comments on its Facebook page that paint a picture of everyday life. "I don't know how it is elsewhere, but in Poreč I saw prices in shops going up, not down," wrote Đenio Jurcan. "Everything is getting crazily more expensive, only watermelons have gotten cheaper," added Draga Crnojević, while Karmelina Orsag pointed out that utility prices have risen by more than 30 percent.
In the first part of the year, when inflation exceeded five percent, the government resorted to an anti-inflation package, changes to lump-sum taxation, regulation of administered prices and the introduction of a tax on excessive margins, and it also reinstated fuel price caps. Vušković acknowledges that these measures cushioned the blow for citizens, but stresses that they are not sufficient on their own. "In the long term, lower inflation depends on higher productivity, stronger competition and responsible fiscal policy," he said.
And while Ćorić said it was time for everyone to go on annual leave, Vušković warns that there is still much work to be done. "There is no reason for panic, but there is none for complacency either. Inflation has slowed, but it remains significantly above the euro area average. Until we approach the level of around two percent, it is too early to say the problem is solved," the economist concluded.
