Croats unconvinced over Commission’s positive inflation forecast
Inflation in Croatia is expected to drop dramatically in Croatia this year and the next, according to the European Commission’s latest projections, though Croats themselves remain unconvinced.
The European Commission published its Winter Economic Growth forecasts regarding growth and inflation in Croatia on Monday.
Inflation is expected to drop from 10.6% in 2022 to 6.5% in 2023, and then further down to 1.6% year-on-year in 2024 – a drop predicted due to the likely fall in energy prices, which in 2022 reached record heights due to the war in Ukraine.
Croatia saw its GDP grow by an estimated 6.3% in 2022, according to the European Commission, revising its earlier forecast by 0.3 percentage points.
For 2023, the Commission projected 1.2% growth for 2023 – up from its 1% growth estimate from November. The Commission revised its forecast mainly due to Croatia joining the eurozone and free-visa Schengen Area in January, both of which are expected to boost investments, cross-border trade, and the overall cost of doing business.
The Commission’s optimism regarding inflation in particular, however, appears to be at odds with concerns many Croatians had after the country joined the Eurozone. Local media reported extensively about hikes in retail prices throughout January amid the replacement of the national currency, the kuna, with the euro.
The concerns were somewhat confirmed by the conservative Prime Minister Andrej Plenkovic who accused some retailers of using the situation to their benefit by rolling out unjustified price hikes. He asked retailers to return unjustified prices to previous levels and threatened punitive measures.
To help Croatians navigate rising prices, the government announced it is working on an app that will allow Croatians to compare the prices of hundreds of products at three of the country’s 10 major retail chains.
Meanwhile, Croatia’s central bank governor, and the newest member of the ECB, Boris Vujcic, has downplayed the effect the shift to the euro currency has had on pushing up the already double-digit inflation rate even further.
“The inflation flash estimate and our inflation nowcasting data confirm that yes, there was some impact of the euro’s introduction on prices, particularly in services. But this was as expected and was not large, probably around 0.3 to 0.4 percentage points, a one-off effect,” Vujcic said in an interview with Reuters published on the central bank’s website.
(David Spaic-Kovacic | EURACTIV.hr)