Thursday, 2 February 2023

CNB: Introduction of Euro has not Worsened Inflation in Croatia

February 2, 2023 - The first data on January inflation in Croatia indicate that the introduction of the euro, like in other countries, has not significantly impacted overall inflation, according to the Croatian National Bank (CNB).

"Movements in January suggest that the introduction of the euro in Croatia could have had a relatively mild impact on overall inflation, which is in line with the experience of other countries," the CNB's statement says. It is added that, following the experience of other countries, the increase in prices after the introduction of the euro is probably most apparent in the service industry. For a final assessment of the price increase after the introduction of the euro in Croatia, it is necessary to wait for detailed data for January and the next few months, according to the central bank, as reported by Index.

Prices are almost 13 percent higher than in January 2022

After Croatia's entry into the euro area, Eurostat and the State Statistical Office published today for the first time a rapid estimate of inflation in Croatia. According to these data, in January of this year, compared to January of last year, prices were higher by 12.7 percent on average and compared to December, they remained the same.

On a monthly level, compared to December last year, food, drinks, and tobacco are 1.3 percent more expensive, services were inflated by 1.1 percent, industrial non-food products without energy are estimated to have decreased in price by 2.1 percent, and power by one percent.

"The decrease in prices of raw materials also contributed to the slowdown in inflation."

CNB says that the slight slowdown in inflation in January is in line with their expectations based on the reduction in the prices of oil derivatives and assessments of the slowdown in the annual growth of food prices.

"The decrease in prices of raw materials on the world market, visible since the middle of last year, as well as the gradual elimination of the remaining bottlenecks in the supply chains, contributed to the slowdown of inflation. On the other hand, the significant effects of weakening economic activity are not yet visible," says the CNB.

Bearing in mind indications of easing of inflationary pressures at the global level, as well as statistical elements in terms of the favourable effect of the base period, in the continuation of 2023, they expect a further gradual slowdown of the annual inflation rate, although it will remain elevated for some time.

"However, it should not be ignored that the risks of future inflation outcomes being higher than projected are still considerable," the central bank says.

For more, make sure to check out our dedicated News section.

Tuesday, 31 January 2023

Inflation in Croatia Follows EU Trends, Higher in Lower-income Households

January 31, 2023 - Inflation in Croatia is following the EU trends, being a lot more noticeable and, therefore worse for lower-income households. Inflation for those who earn more is lower. What is the difference exactly?

As Poslovni writes, the difference in inflation for the ten percent of households with the lowest income and the ten percent of the strongest households in Croatia amounts to about five percent. Marina Tkalec, a senior research associate at the Zagreb Institute of Economics, recently presented the estimate.

Individually, she added, there are also households whose inflation is 30 percent. These are highlights from the second phase of a three-year research project on inflation inequalities in Croatia. She is working with two other colleagues, Ivan Žilić and Ivica Rubil.

After the first results were published less than a year ago, new findings on inflation inequality are expected to be presented this week.

The extent to which recent inflation trends affect different population groups differently and how low- and high-income households face different inflation rates due to differences in consumption patterns is also addressed by the international think tank Bruegel.

These days, they published a comparative image for the countries of the European Union with data for the end of last year. However, this overview does not compare deciles, but the fifth of households with the lowest incomes and the fifth of the highest-income households.

In short, Croatia fits into the prevailing pattern among EU members: households with low incomes face a higher rate of inflation than those with high incomes. There are opposite examples in the EU, with higher inflation for more affluent households, but there are significantly fewer of them, and they are mostly the most developed EU members, such as Sweden, Finland, and Germany.

According to Bruegel's data, when it comes to inflation in Croatia, the difference between the lower and upper quintiles is less than two percentage points (1.86 pb). For the lower-income households, inflation at the end of last year was 14.55 percent, and for the higher-income ones, it was 12.7 percent. That difference may not look significant; however, there are considerable differences within these classes. The gap is mitigated to some extent by government interventions, especially in energy and food prices. In addition to that, it should be borne in mind that in order to influence inflation inequality, it is essential that the price of a specific consumption category changes and that it makes up a different share in the consumption baskets of low- and high-income households.

While, for example, a sharp increase in fuel price increases overall inflation, a household without a car will be less affected than one with a car or two. The same price increase has a different impact depending on the share of total household expenditure.

This is certainly the case with average food prices, which have risen by a fifth annually, and have a much larger share in the expenses of poorer households than in wealthier ones. The same applies to housing, electricity, heating, and water costs. However, the impact of price increases on transportation items is the opposite.

Households with high(est) incomes are more exposed to price increases for these services and goods (vehicles, fuel, maintenance, repairs). This is because they drive and travel more, often have more cars, and buy them more often, so their share of these expenses is many times higher than the lowest-income households (often without a car, relying on public transport).

For the same reasons, for example, the annual increase in the prices of clothing and footwear has a mitigating effect on the inequality of inflation; although price increases were smaller there, this category has a significantly larger share in consumption expenditures among households with high(est) incomes.

According to Bruegel's calculations, the difference in inflation in Croatia in the observed income classes is significantly smaller than in several countries where inflation is around 20 percent (Lithuania, Latvia, Hungary) and in Bulgaria, Romania, or Slovakia. In Latvia, for example, this difference is 7.6 points. At the same time, in the Czech Republic, Poland, and Slovenia, this measure of inequality is slightly lower than in Croatia.

Habits, circumstances...

In periods of high inflation, few households will recognize themselves in the official figure. In addition to the level of disposable income, the question of consumer habits, preferences, and other life circumstances is also important. Similar to average and median wages, higher-income households have a larger share in official inflation. "At that level, every kuna spent, and not every household, holds one vote," emphasizes Tkalec. The diversity of the spending structure is usually read in the CBS Household Consumption Survey.

According to the distribution resulting from the last available Survey conducted in 2019, ten percent of those from the lowest income bracket spend 40 percent on food and non-alcoholic beverages, while the top ten have half the share. There is a similar gap in housing, electricity, heating, and water costs; for the lower decile of households, 30% of expenses go to them, and for the upper decile, slightly more than 15%.

In contrast, in the basket of the best-off ten percent, ten percent is spent on clothes and shoes, and an average of only three percent in the bottom decile. The difference is much more pronounced in the share

ma transport costs; They take 1.4% from the poorest tenth (for many, only public transport), and for those from the top decile, this item makes up almost 16%.

All in all, the poorest ten percent (retired, single households) spend 70% on food and utilities, and the top ten spend less than a third on average.

Uncertainty and risks

However, even for those halfway between these classes, the "real" inflation is slightly higher than the official 13.1% for December. Everything indicates that the slowdown will be less than was calculated until recently. There are also some potential "distractions" on that track. Željko Lovrinčević from EIZ sees several of them in the coming months. One is the EU embargo on diesel imports that comes into effect on February 5.

At the beginning of March, spring sowing begins with accompanying questions (prices of diesel, fertilizer, planting material). A month later, it remains to be seen what the new framework will look like after the end of the period during which the Government limited the prices of some energy products to consumers. Finally, he says, certain uncertainties and risks in terms of prices are usually associated with the beginning of the tourist season.

For more, make sure to check out our dedicated News section.

Friday, 27 January 2023

Price Increase Data: Here is How Croatia Compares to Rest of EU

January 27, 2023 - Eurostat has published data on the food price increase in the EU, broken down by member state. Croatia can be compared with the average and other countries, which reveals how much and why/who caused food prices to rise in previous years and in quite a bit of detail.

As Index writes, food prices can be monitored in several ways. For simplicity of presentation, they compared Croatia with the EU average, neighbouring countries Slovenia, Hungary, and Italy, and Germany as the largest EU economy. Slovakia was also added as the EU country most similar to Croatia in terms of population and standards.

In addition to the overall price increase, data are also given by the type of food products. Readers can select the categories by clicking on the menu in their interactive tables. Tables with data on the increase in the prices of bread, meat, milk, cheese, eggs, oil, fat, fruit, vegetables, beer, and wine have been published. 

How much have food prices increased in stores?

The most important category of food price increase for citizens is the harmonized index of consumer prices, which is actually a measure of inflation and shows how the prices in stores paid by end customers, i.e. citizens, have changed. In December 2022, the food price in Croatia, according to the harmonized index of consumer prices, was higher by 19.7 percent compared to December 2021.

This is a higher price increase than in Italy, a little higher than the average of the EU and Slovenia, and at the level of Germany. In Slovakia, food became more expensive, but the absolute record holder is Hungary, where the price of food in stores was higher by 49.6 percent during December 2022 compared to December 2021.

Bread

Understandably, not all categories saw an equal price increase. The price of bread in Croatia increased much more than in Italy, Slovenia, and the EU average. Approximately the same increase was recorded in Slovakia, while Hungary, with an increase of 82.1 percent, is the absolute EU record holder. Interestingly, in October the price increase of imported bread in Croatia was 30.9 percent, far less than in Germany, Italy, Hungary and Slovenia, where the import prices of bread increased by about 50 percent.

Meat

Meat price increase in Croatia is at the level of the EU average (17 percent), more than in Italy, and less than in Germany and Slovenia. Slovakia and Hungary stand out with a particularly high price increase, of 30 and 40 percent. Along with the increase index of consumer prices, i.e. prices in stores, the increase of import prices of a product and the growth of producer prices can be monitored.

In November, producer prices of meat in Croatia increased the least of the observed countries and less than the EU average. But data for October show that import prices in Croatia increased the most of all countries except Hungary.

Looking at the types of meat, chicken stands out, whose price increase in Croatia (18.1 percent) is the lowest among the observed countries and below the EU average (23.5 percent).

Milk, cheese and eggs

The prices of milk, cheese and eggs in stores (consumer prices) in Croatia were higher than the EU average, but lower than in Germany and Slovakia. The price increase of 73.2 percent in Hungary compared to December 2021 is by far the highest in the EU (the second highest is in Lithuania and amounts to 47.4 percent).

Looking at categories, the price of fresh whole milk in Croatia has increased the least compared to the EU, although until August Croatia was the record holder for the increase in the price of this food. However, between August and December, the price dropped sharply, so Croatia ended the year with the lowest increase in the price of these foodstuffs among the observed countries. It is interesting that data from October for import prices of that product show the highest increase in Croatia, even though consumer prices have been falling sharply since August.

The increase of the price of eggs in Croatia is extremely high, by as much as 64.5 percent. This is less than in Slovakia and Hungary, but far above the EU average (30.2 percent). The increase in the prices of yogurt and cheese does not deviate that much from the EU average, although it is higher in Croatia.

Oils and fats

The prices of oils and fats grew the least in Croatia of the observed countries. Until June 2022, it was even higher than the EU average, but since then it has been sharply decreasing. Import prices recorded a significant growth during the year (33.6 percent), although they have been decreasing since June. Producer prices in Croatia increased much less than import prices, and in December they were only 5.5 percent higher than in the same month of 2021.

Fruit

The increase of fruit prices was on average weaker than the increase of other food products. In Croatia (9 percent) it is slightly higher than the EU average (8.1 percent). Interestingly, overall, since 2015, the price of fruit has increased by 17.2 percent in Croatia, 29.9 percent in the EU, and even 94.5 percent in Hungary. For Croatia, this is the lowest price increase since that year for all food categories.

Vegetables

The increase of vegetable prices in Croatia (8.8 percent) is the lowest among the observed countries and below the EU average (15 percent). Compared to 2015, these prices are 23.2 percent higher, and the record holder is Hungary with 117.9 percent higher prices in December 2022 compared to the average price of vegetables in 2015.

Fish and seafood

The prices of fish and seafood in Croatia grew more than the EU average, 17.7 percent versus 13.3 percent. Of the observed countries, the growth was higher only in Germany, and in Hungary it was so high (39.4 percent) that it belongs in its own class. The increase in import prices was higher than the increase in producer prices.

Beer

Considering other food products, the price of beer did not increase significantly. In Croatia, a growth of 10.7 percent was recorded, which mostly occurred in December. If it had not been for that sudden jump, the price increase would have been only 5.1 percent, the smallest of the observed countries. The record holder is Hungary again.

Wine

The increase in the price of wine in Croatia in 2022 was atypical, for most of the year it was higher than in Hungary. In December, price increase compared to the same month last year was 18.6 percent, which is a slowdown compared to November. Hungary did not slow down, so it overtook Croatia with a growth of 19.5 percent. The EU average is 7.6 percent.

Producer and import prices

In Croatia, the price increase of imported food was at 25.3 percent, less than the producer price, which grew by 17.1 percent. This means that the increase in prices results more from the increase in import prices than from the increase in the prices of domestic producers. The same applies to Italy and Slovenia.

Hungary has the opposite situation - the increase of producer prices in the country is higher than the increase of import prices. Although producer prices refer to the prices of domestic and foreign producers, import prices refer only to foreign countries. From this, it can be concluded which had a greater impact on the growth of consumer prices in stores.

In December, there was a noticeable slowdown in the price increase of most categories of food products. At the EU level, the food price index (HICP) fell from 18.3 to 18.2 percent, which may be a hint of the beginning of a new trend. In Croatia, the increase has been slowing down since the end of October, when increase compared to the same month last year was 20.5 percent, and in December 19.7 percent. This does not mean that prices are falling, but it is a signal of slowing increase.

For more, make sure to check out our dedicated News section.

Thursday, 26 January 2023

Croatian Pension and Wage Growth Now More Necessary Than Ever

January the 26th, 2023 - Alright, this title is slightly misleading because we've needed Croatian pension and wage growth for a very long time now, but after becoming a full Eurozone member state, it's high time that we saw the numbers in our bank accounts go up, even just a little bit.

As Poslovni Dnevnik writes, recently, there have been signs of inflation finally stabilising after a certain drop in electricity and gas prices was duly noted, but despite that, in general prices are still high, and Croatian living standards are falling, which is why Croatian pension and wage increases are now more necessary than ever.

These are just some of the conclusions reached as part of the recently held "Eurostands - Perspectives and challenges" in the City of Zagreb. The head of the Independent Croatian Trade Unions, Kresimir Sever, reiterated that subjective inflation is still being very much felt by most of the country's households and is significantly higher than official statistics. He said because of that, Croatian pension and wage growth is necessary. On the other hand, the chief economist of the Croatian Association of Employers (HUP), Hrvoje Stojic, said that HUP members have seen their employee salaries rase above the national inflation level.

Stojic also noted that the wider Eurozone's economy will experience a certain strong slowdown throughout 2023, during which there will be a "cooling" of aggregate demand, but he added that inflation could be up to two percentage points lower compared to the estimates provided back at the end of 2022.

He believes that due to the unusually mild winter we've all been experiencing, the whole of Europe could avoid dipping into the expected recession in 2023, but also that there is an option to simply "postpone" it to the second half of this year, or even until next year. Professor Marijana Ivanov of the Faculty of Economics warned that inflation reduces the real value of everything we own, and that we need to keep paying attention to the trends.

However, it is positive that there are still no risks of unemployment growth in the Croatian economy, but the general standard of living in slipping.

''Croatian living standards are decreasing, but somehow we're managing despite all of the current challenges," she concluded.

For more, make sure to check out our dedicated news section.

Friday, 20 January 2023

Croatian State Inspectorate Claims Some Stores Raised Prices by 126%!

January the 20th, 2023 - The Croatian State Inspectorate has been on the hunt for those stores and goods and services providers unjustifiably raising their prices and has uncovered some startling price hikes.

As Poslovni Dnevnik writes, ever since January the 5th, 2023, when the Croatian Government adopted a conclusion on the implementation of the principle of prohibiting unjustified price increases, the Market and Tourist Inspection of the Croatian State Inspectorate has been carrying out increased inspections aimed at determining whether there has been an increase in the prices of goods and services immediately before the introduction of the euro as the country's new official currency.

Inspections are being carried out on the basis of the Law on the State Inspectorate, the Law on the introduction of the euro as the official currency in the Republic of Croatia, the Law on Consumer Protection and as a result of the aforementioned Conclusion of the government.

Until January the 19th, the Croatian State Inspectorate carried out a total of 1,145 inspections. In 25.2% of the performed inspections, excluding inspections in which the facts are still being determined (163 of them), unjustified price increases which took place December the 31st, 2022 were found.

Out of the total number of inspections, the market inspection of the Croatian State Inspectorate carried out 659 inspections (of which there were 282 inspections of service providers, 280 inspections in retail trade and 97 inspections into retail bakery products).

In the supervision of the market inspection, unfair business practices involving unjustified price increases were found in a concerning 87 cases, of which in 53 cases were discovered in service activities, 19 in the activity of retail trade in bakery products and 15 in other forms of retail trade.

The average unjustified increase in service prices stands at 20%, and in some cases the increase has reached a disgusting 126%. For example, the Croatian State Inspectorate found an increase in photography services of 57%, individual hairdressing services by 126%, private parking services by 25%, self-service car wash services by 50%, and that list goes on and on a bit more.

In the retail trade sector, an unjustified increase of 17% was determined on average for controlled products after December the 31st, 2022, for example - chicken and turkey meat, dried meat products, water, juice, eggs, confectionery, dairy products, animal feed, canned vegetables, all shot up considerably.

Likewise, in the retail trade of bakery products, we've been continuing to record an increase in the prices of both bread and other bakery products of up to 15% on average, and exceptionally, for some inspections, an increase of 20 to 30% was found for individual bakery products. Tourism inspectors carried out 486 inspections, of which in 161 inspections (33.1%) they came across an unjustified increase in the prices of catering and hospitality services.

In 72.6% of the completed inspections in which unjustified price increases were found, business entities returned their retail prices to the levels they were at back on December the 31st, 2022 immediately.

Due to the violation of unfair business practices from 149 of the Act on Consumer Protection, fines are being imposed on all business entities that unjustifiably increased their prices after December the 31st, 2022, that is, from January the 1st, 2023 until the day of the completed inspection.

In the completed inspections, 234 fines in the amount of 399,489.09 euros (3,009,950.55 kuna) were issued with their accompanying misdemeanor orders against business entities. Croatian State Inspectorate inspections will continue in the name of consumer protection with each inspection being part of its own respective jurisdiction.

For more, make sure to check out our news section.

Friday, 20 January 2023

Norwegian Company Statkraft Reveals Scale of Croatian Energy Bill Worries

January the 20th, 2023 - The Norwegian company Statkraft has shed light on the scale of Croatian energy bill worries, among other things, in its research. Statkraft is otherwise Europe's largest producer of renewable energy.

As Poslovni Dnevnik writes, the aforementioned Norwegian company conducted a survey among more than 18,000 respondents across nine countries, including the Republic of Croatia, about what consumers think about climate change and the current soaring energy prices.

Overall, at the level of all the countries included in the research, three quarters of respondents are concerned about the negative consequences of climate change and see one of the solutions lying precisely with renewable energy sources. More than two-thirds (69%) believe that the development of renewable energy sources should be a priority given the problems with climate change and energy supplies. Almost a quarter of those surveyed (23%) said that their perception of renewable energy sources has become more positive over the last six months, while the overall rate of acceptance of wind power plants and solar power plants is now at the level of 80 and 87 percent, respectively.

Croatian energy bill worries are the highest, just like they are for the Irish

Of all the countries surveyed, concern about the potentially higher cost of electricity was highest in Ireland (86%) and Croatia (81%). When asked about electricity prices, 81% of people surveyed here in Croatia are concerned about the possible costs of their electricity bills; 62% of the respondents think that they may not be able to cover the expected increase in energy prices with their savings, while as many as 85% think that more and more serious investments in renewable energy sources across Croatia should have been made a very long time ago.

Despite this pressure of rising energy prices that people feel, 50% of respondents in Croatia say that due to other challenges they're dealing with in life, they don't have time to look for more favourable options for supplying electricity.

Respondents in Croatia also showed the greatest concern among all countries regarding the security of an energy supply – 77% of respondents stated that they were concerned about the issue of security of energy supplies. At the same time, 56% of the respondents from Croatia - again the highest percentage among all the surveyed countries - say that they were primarily motivated by the war in Ukraine to take such a view and attitude; 79% of citizens claim that they began to consider the topic of energy in a more significant way only because of this war.

Croatia also leads the way in terms of awareness of sources of electricity – the vast majority of respondents (87%) claim that they know where their energy comes from; this is again the highest percentage in this survey across all of the involved countries.

Arnaud Bellanger, Statkraft's manager for the Republic of Croatia, commented on the survey results in Croatia with the following words: "These survey results show clear public support for the development of clean energy, with people wanting Croatia to act quickly on this. By increasing the production capacity of renewable energy and reducing dependence on fossil fuels, Croatian consumers can be additionally protected from changes on an unstable market which is facing rising costs.''

Croatian residents are aware of the issue of climate change, but mostly they don't know about the initiatives that are trying to solve this pressing problem

Croatian residents are well aware of the issue of climate change, and 75% of respondents in this survey said they were worried about the direct consequences of climate change on them and their families. They're mostly worried about floods, fires, heat waves and a rise in sea levels (48%), the impact on human health (42%), the negative impact on food prices (40%), the impact on human and animal habitats (39%) and the inability to plan for the future because of these dire uncertainties (23%).

However, in this survey, as many as 93% of Croats said that they weren't aware of any specific goals and activities that the country is undertaking to become carbon neutral. Respondents are divided about who should primarily solve the problem: 36% of people say that they don't feel any pressure or incentive to face the problem themselves, while 31% are very aware of it and feel a need to act.

Public support for significant expansion of renewable energy sources

Croatian residents believe that the government should primarily encourage solving the problem of climate change through more policies and incentives to reduce carbon emissions, including incentives for electric vehicles (56% of respondents), the faster introduction of clean energy for personal and business use (46%), the better education of people about how they can reduce their carbon footprint on their own (49%), more incentives for the use of clean energy in companies and industry (59%) and an easier process for planning initiatives that work to fight climate change (42%).

Faced with rising energy prices due to the war in Ukraine and the climate crisis, respondents in Croatia overwhelmingly (75%) said that significant expansion of production capacity in the area of renewable energy sources must become a priority throughout Europe. One third of Croatian respondents - 34% of those surveyed - say that they view renewable energy sources, stimulated by these crises during the past months, much more favourably than they did before.

For more, make sure to check out our news section.

Wednesday, 18 January 2023

Despite Croatian Euro Price Hikes, Prices Actually Fell in December 2022

January the 18th, 2023 - Despite all of the panic and in many cases confusion surrounding Croatian euro introduction, ongoing inflation and price hikes, prices for an array of products actually fell back in December last year.

As Jadranka Dozan/Poslovni Dnevnik writes, quite on the contrary to public perception and the current clamor and naming and shaming of the culprits for price increases in the context of Croatian euro introduction, December 2022 ended with a monthly drop in consumer prices.

According to the National Bureau of Statistics (CBS), at the end of the 2022, prices were on average 0.3% lower compared to what they were in November, which brought the annual inflation rate down from 13.5% in November to 13.1% at the end of December. Looking at the annual average, consumer prices last year were 10.8% higher than they were just one year before.

Last month's decline is, admittedly, primarily the result of lower transportation costs, i.e. the price reduction of petroleum products during December. In addition, seasonal reductions in clothing and footwear, as well as somewhat lower housing and utility costs (in the part influenced by fuel prices) also contributed to the monthly decline to a slightly lesser extent.

In short, as the transportation category accounts for about 15 percent of expenses within the consumer basket, their drop by 4% "overpowered" the price increases in the food and non-alcoholic beverages group. The share of this group in the expenses of the average household budget is significantly higher (26%), but the prices of food and beverages on a monthly level, according to the CBS, increased by a significantly smaller 1.2%. That's what the average more or less looks like, but some food products went up in terms of cost significantly more in December.

For example, when compared to November, the price of butter in Croatia rose by as much as 11% (22.8% on an annual basis), eggs by 9.2% (compared to December the year before, they were 64.5% more expensive), and more than the average monthly increase in food prices also increased the prices of bread, pork, fish, milk and dairy products, fish, olive oil, and so on.

Overall, the annual inflation rate for food and non-alcoholic beverages stood at 19% at the end of the year. If only food is considered here, then annual growth has only been slightly moderated, from 19.7 to a barelt different 19.6%.

However, in addition to the aforementioned prices of eggs and butter, a number of foodstuffs on an annual level record price increases of more than 20 percent; from bread, cheese and sugar, which at the end of 2022 compared to the end of 2021, increased in price by more than 30% (bread by almost 33%, cheeses by 34%), to, for example, frozen vegetables which carried almost 45% higher prices on average.

Although last month's prices of oil derivatives indicated that it would be a significant inflation shock absorber, some analysts will say that they still expected inflation to remain at around 13.5% at the end of December.

For the Croatian Employers' Association (HUP), the latest data from the CBS isn't remotely unexpected. They also pointed out that the annual rate could culminate in January, after which it should fall once again over the coming months. The rise in service prices basically reflects the incomplete recovery of aggregate demand after the coronavirus pandemic finally subsided, as well as the labour shortage and the delayed adjustment to last year's input price increases - these are just some of the main points of the comments of HUP and their chief economist Hrvoje Stojic.

In addition to all of the above, they are reminiscent of signals related to core inflation. If volatile food and energy prices are excluded from all of this, the basic measure of inflation simultaneously shows its annual growth at 9.7%, from 8.9% back in November.

"This indicates that inflation will remain at high single-digit levels for the foreseeable future," they stated from HUP. In terms of the twelve-month average, after last year's 10.8 percent, according to their forecasts, this would mean a drop to the still relatively high 7.5 percent inflation this year. The expectation of lower monthly inflation dynamics is explained by the expected decline in aggregate demand, i.e. the technical recession over the first half of the year, as well as the stabilisation of energy prices, the normalisation of supply chains and a certain decline in the prices of food raw materials.

Energy prices, which are currently in decline thanks to an extremely mild winter across all of Europe, are still being calculated with a relatively high uncertainty factor.

"Despite government subsidies, electricity prices are still about four times higher than pre-2021 levels, which is symptomatic of a long-term energy crisis. This summer, a new race between EU member states to fill gas storage will begin, so the European Commission (EU) needs to provide new mechanisms for stabilising those energy prices,'' they pointed out from HUP. If the proposed price limit had been in effect last summer, the EU probably wouldn't have provided sufficient quantities of gas even to those who were perfectly able pay at the prices above the typical price limit.

The simultaneous fall in inflation across the Eurozone during the first half of the year could encourage speculation about the end of the cycle of growth of the ECB's reference interest rates. However, HUP is remaining strong in its belief that core inflation across the Eurozone, as well as right here in Croatia, will remain well above the ECB's inflation target of around 2% in the foreseeable future.

"Furthermore, fiscal expansion continues and wage growth accelerates, which may also affect price expectations. For this reason, a further increase in the deposit rate to 3.25-3.50 percent by the summer of 2023 is to be expected in the ongoing and seemingly tireless fight against inflation. The rise in interest rates along with the simultaneous planned reduction of the ECB's balance sheet at a rate of 15 billion euros per month from March onwards will also contribute to the deterioration of financing conditions in a situation where financing needs are growing strongly in many Eurozone countries, including in this country, where Croatian euro banknotes and coins are now the new currency.

If we stick to the latest figures from the CBS on inflation across the country in the month preceding Croatian euro introduction and the confusion surrounding conversion and ongoing inflation, it remains to be noted that in 2022, in addition to food and non-alcoholic beverages, above-average price growth was also recorded in the categories of restaurants and hotels (17.1%), furniture and household equipment (16.1%) and housing and related utilities (16%).

Due to the market movement of oil prices, and due to the Croatian Government's various economic measures, the transportation sector ended in 2022 with an annual growth of only 8.4 percent. If only fuels are considered within that category, where annual inflation stood at a whopping 21.5 percent in January last year, 2022 ended with a price increase of only 6.7 percent.

For more on Croatian euro introduction and inflation, make sure to check out our news section.

Saturday, 14 January 2023

Croatian Stores to Send Their Price Lists to Government Often?

January the 14th, 2023 - The price increases we've witnessed up and down the country ever since the euro was introduced on the first day of this year have been rather astonishing. While most people expected prices to go up a little bit, what has been happening is ''pure profiteering'' as Plenkovic himself described it. The government has stepped in with some measures, and it seems Croatian stores are being put well and truly under the radar of the authorities.

Economy Minister Davor Filipovic has been very vocal about the measures set to prevent Croatian stories from taking advantage of not only inflation but of the introduction of the new currency, and it appears that the idea of Croatian stores having to send their price lists to the government every two weeks for the foreseeable future is now on the table.

As Poslovni Dnevnik writes, the deadline given by the government to all those who raised their prices unjustifiably to return them to what they were back before Croatia entered the Eurozone (December 2022), or sanctions would be imposed expired just a couple of days ago. Economy Minister Davor Filipovic repeated in an interview with Media Servis that either freezing the prices of a wider number of products or cancelling subsidies entirely is currently being considered in an attempt to combat this situation.

When asked why he was going off an the initial idea of having blacklists on which Croatian stores and service providers who had unjustifiably raised their prices would be placed, he replied that his ministry had sent a letter to the ten largest retail chains with the request that they provide the government with their respective price lists for about 80 products for the whole of last year.

"We've asked that they continue to deliver their price lists to us every two weeks, which we will put on the Internet and enable everyone to watch the price movements in the largest retail chains in one place. I'm not going to say that it is a black list, but if people can see it all and make a comparison in one place, it can be observed in that context,'' said Filipovic of the move.

"The State Inspectorate established that there was an increase in prices of food products from 6 to 20 percent, and that includes bakery products as well,'' he added.

You can read more about the scrutiny Croatian stores and other service providers have been placed under from the powers that be, which includes all authorities from the Tax Office to Customs and the State Inspectorate in our most recently published Week in Croatian Politics article, which discusses the topic at length.

Sunday, 18 December 2022

Croatian Fuel Prices to Finally Drop Below 10 Kuna This Week

December the 18th, 2022 - Croatian fuel prices are set to finally drop back down below ten kuna per litre after a very long time, with some weeks seeing it remain at around sixteen kuna per litre. Minister Davor Filipovic has since confirmed this.

As Poslovni Dnevnik writes, on Monday, this week, the government should pass a new regulation on Croatian fuel prices, and according to sources from the wholesale market, the pressure on fuel prices could ease. Currently, Croatian fuel prices are being adjusted so that petrol is being sold for 10.6 kuna per litre, diesel for 11.59 kuna per litre, and blue diesel for 7.95 kuna per litre.

tportal's reliable source from the wholesale market revealed that starting next week, all fuels, especially diesel, could be cheaper.

According to current data, on Monday, a litre of diesel wholesale will be sold at 11.64 kuna, which is 53 lipa less than the current fixed prices.

Petrol will probably drop below ten kuna, because its valid wholesale price from Monday is 9.47 kuna per litre, which is 1.13 kuna less than the current price. Minister Davor Filipovic recently confirmed the very welcome drop in Croatian fuel prices, stating the following:

"When you take into account the trading of petrol and diesel on the Mediterranean market for the past two weeks, there will be a noticeable reduction in the prices of petrol, diesel and blue diesel. So, starting Tuesday, there will be more favourable Croatian fuel prices.''

He said that he couldn't give any specific figures yet "because at the moment things are still being traded the same way. We'll see what happens after today's trading, but in any case, it's good news.''

For more on Croatian news, make sure to check out our dedicated news section.

Saturday, 17 December 2022

Record Croatian Inflation Driving Food and Drink Prices Even Further Up

December the 17th, 2022 - Record Croatian inflation is sending the prices of food and drink skyrocketing as the pressures being placed on our pockets and bank accounts show little to no signs of letting up yet.

As Poslovni Dnevnik writes, at the annual level (comparing the months of November 2021 and November 2022), the prices of goods and services for personal consumption, as measured by the consumer price index, were on average a concerning 13.5% higher, the State Bureau of Statistics recently announced.

The latest statistical data shows that the growth of consumer prices has well and truly accelerated on an annual basis. According to the record data published to date, the highest rate of annual Croatian inflation so far was recorded in October, when it amounted to a worrying 13.2 percent.

The biggest increase was observed in the food and non-alcoholic beverages group

Observed according to the main groups of the ECOICOP classification, on an annual basis, the largest increase in consumer prices on average was achieved in the groups Food and non-alcoholic beverages, by 19.2%, Restaurants and hotels, by 17.0%, Furniture, home equipment and regular household maintenance by 16.6%, Housing, water, electricity, gas and other fuels, by 16.5%, Transportation, by 13.3%, Various goods and services, by 11.6%, Recreation and culture, by 9.1%, Clothing and footwear, by 5.8%, Alcoholic beverages and tobacco, by 4.6%, Healthcare, by 4.1%, and Education, by 2.3%.

The largest contribution to the growth rate of the annual index was achieved in the groups Food and non-alcoholic beverages (+4.98 percentage points), Housing, water, electricity, gas and other fuels (+2.78 percentage points), Transportation (+1.96 percentage points points), Furniture, home equipment and regular household maintenance (+0.95 percentage points), Restaurants and hotels (+0.85 percentage points), Miscellaneous goods and services (+0.72 percentage points), Recreation and culture ( +0.48 percentage points), Clothing and footwear (+0.34 percentage points), Alcoholic beverages and tobacco (+0.23 percentage points) and Healthcare (+0.13 percentage points).

Observed according to special groups, the highest increase in prices on average at the annual level was achieved in the Energy group, by 21.2% (contribution to the increase of +3.56 percentage points).

As Croatian inflation continues to make more and more people struggle to make ends meet each month and drag those who were on the breadline deeper into poverty, many are asking whether or not the government is doing anywhere near enough to really curb the events of this unprecedented living crisis.

For more, check out our dedicated news section.

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