Inflation in February amounted to 3.7 percent, higher than the initial estimate of the CBS

The price war in Croatia last month was somewhat stronger than the initial estimate by statisticians. Inflation in Croatia amounted to 3.7 percent year-on-year, according to the second data released by the Croatian Bureau of Statistics (CBS) on Monday, which slightly revised its first estimate of inflation from 3.6 percent published at the beginning of the month.

Compared to the previous month, inflation was lower by 0.1 percent. Despite the upwardly revised figure, inflation again shows downward trend. Recall that in October of last year, a multi-month trend of slowing price growth year-on-year was interrupted, following increases of 2.2 percent in October, 2.8 percent in November, 3.4 percent in December, and 4 percent in January of this year.

Price surge in hospitality

According to the main components of the index, the estimated annual inflation rate for services is 5.7 percent, for the group including food, beverages, and tobacco 4.9 percent, for energy 3.6 percent, and for industrial non-food products excluding energy 0.2 percent, as stated in the CBS announcement. Compared to the first estimate, the annual price growth rate for energy was revised upward from 3.4 to the mentioned 3.6 percent.

On a monthly basis, compared to January 2025, prices of food, beverages, and tobacco as well as industrial non-food products excluding energy fell by 0.4 percent each. Energy prices rose by 0.8 percent (in the first estimate 0.6 percent), while service prices on average remained at the same level.

When viewed according to the main groups of the ECOICOP classification (classification of individual consumption by purpose), the highest average increase in consumer prices year-on-year was recorded in restaurants and hotels, at 9.7 percent, and in various goods and services, at 6.5 percent. Prices also increased in recreation and culture, by 5.5 percent, education, by 5.3 percent, food and non-alcoholic beverages, by 5.1 percent, housing, water, electricity, gas, and other fuels, as well as health, by 4.6 percent each, and alcoholic beverages and tobacco, by 3.9 percent.

The annual price increase was mitigated by a decline in communication prices, by 3.5 percent, and clothing and footwear, by 2.4 percent, according to CBS data.

This year’s slowdown

The inflation rate in February is what it should be for the entire year, according to the Spring Macroeconomic Projections of the Croatian National Bank (HNB) published last week. After a temporary acceleration of inflation at the end of 2024 and the beginning of 2025, due to strengthening inflationary pressures in the components of food, services, and energy, a nearly continuous slowdown is expected for the remainder of the year, according to analysts at the central bank.

– The reduction in average annual inflation could be most significantly contributed to by the slowdown in core inflation, which could decrease to 3.2 percent in 2025, from 4.8 percent in 2024, under the influence of restrictive monetary policy and weakening demand. Furthermore, the slowdown in overall inflation could to a lesser extent reflect a decrease in the average annual inflation of food prices. In contrast, the average annual inflation rate of energy prices could significantly accelerate in 2025, mainly as a result of administrative increases in the prices of gas, electricity, and thermal energy at the end of last year and the beginning of this year, according to HNB projections.

Balanced and pronounced risks

The average annual rate of overall inflation could further slow down in 2026, which could reflect a slowdown in all its main components, according to the central bank.

– The inflation projection has been slightly revised upward compared to December, primarily due to higher inflation outcomes at the end of 2024 and the beginning of 2025 than previously expected. To a lesser extent, the upward revision is also a result of less favorable assumptions about the movement of energy prices in the global market, although those prices fell after the assumptions were concluded. Overall inflation could thus be higher by 0.2 percentage points in 2025 and 0.1 percentage points in 2026, due to higher expected growth in energy prices and core inflation, while food price inflation could be somewhat lower than what was expected in December. The risks associated with inflation are assessed as balanced, but still pronounced, according to the analysis.