Inflation in Croatia rose from 0.7 to 0.9 percent

In March, inflation in Croatia amounted to 0.9 percent, which is in line with expectations and represents a slight acceleration in retail price growth compared to the previous month, when inflation fell to its lowest levels since 2002.

The Croatian Bureau of Statistics announced today that the prices of goods and services for personal consumption, measured by the consumer price index, rose by 0.4 percent in March compared to February, while they were 0.9 percent higher compared to March of last year. This is in line with expectations as six macroeconomists who participated in a Hina survey estimated, on average, that inflation in March would amount to 0.8 percent. In February, inflation was 0.7 percent, which was its lowest level since August 2002. “This is an expected slight strengthening of inflation and is primarily a result of rising energy prices. As global oil derivative prices reached their highest levels since October 2008 at the end of March, these prices also rose by 3.3 percent in March compared to February, while on an annual basis they increased by more than 20 percent,” says Zdeslav Šantić, chief economist of Splitska banka. On an annual basis, housing and utility prices also rose significantly, by more than 5 percent.

“These administratively set prices, especially for electricity and utility services, will continue to rise, which will lead to a further decline in citizens’ standards and their consumption,” says Šantić. The real decline in wages and rising unemployment lead to a decrease in the purchasing power of the population, which causes reduced consumption that, along with increasing competitive pressures in the retail sector, results in a decline in prices of food and other consumer goods. Thus, in March, on an annual basis, food prices fell by 3.8 percent, while clothing and footwear prices fell by 4.4 percent. “In the coming months, I expect further growth in producer and consumer prices, primarily due to rising gas prices. Producer prices already rose by 5 percent in March, which is the highest growth rate of these prices since November 2008. In the future, we can expect faster price growth than in the eurozone, which could lead to a real appreciation of the kuna, and this, in turn, would reduce the competitiveness of domestic products in global markets and lead to a weakening of exports,” concludes Šantić. (H)