Inflation in Croatia Rises to 1.8 Percent

Inflation in November rose from October’s 1.3 to 1.8 percent, primarily driven by increases in housing and energy prices, which is in line with expectations and indicates that inflationary pressures in Croatia remain weak.

The Croatian Bureau of Statistics announced today that the prices of goods and services for personal consumption, measured by the consumer price index, increased on average by 0.4 percent in November compared to October. Compared to November of last year, retail prices rose by 1.8 percent. This is at the upper end of the expected range. Six analysts surveyed by Hina estimated that inflation in November would be between 1 and 1.8 percent, while they expected an average increase in consumer prices of 1.5 percent.

“The price increase of 0.4 percent on a monthly basis is slightly higher than last month, but on an annual basis, as well as due to the fact that the largest pressures came from rising energy prices, the data is in line with expectations,” says Alen Kovač, a macroeconomist at Erste Bank. The increase in consumer prices in November, compared to October, was most influenced by the prices of housing, water, energy, gas, and other fuels, which rose by 1.5 percent, while transportation prices increased by 1.1 percent and clothing and footwear prices by 0.3 percent. Prices of food and non-alcoholic beverages, furniture, healthcare, and hospitality services increased on average by 0.1 percent.

Due to a decline in consumption and rising unemployment, which does not allow for the transfer of higher VAT to end consumers, inflationary pressures in Croatia have been weak for some time, and it is expected that they will remain so for a while. Some developed countries, including Japan, fear deflation, and there are experts warning that a decline in consumer prices could also occur in Croatia. However, Alen Kovač does not expect deflation. “In the upcoming period, I do not expect significant inflationary pressures in Croatia, nor deflation, as transition countries have somewhat higher inflation than developed countries. A good part of inflation here is imported from global markets, especially regarding oil prices, and with the recovery of the global economy, a gradual increase in those prices can be expected,” concludes Alen Kovač. (H)