According to the first flash estimate of the Croatian CPI, in May 2024, it grew by 0.1% MoM, and 3.3% YoY. Furthermore, the Croatian HICP, which allows comparisons to other European countries, is expected to grow by 0.2% MoM, and 4.3% YoY, being 2nd to only Belgium on the YoY basis.
The latest CPI flash estimate for Croatia has been released on Friday. In the release, we can see that the Croatian CPI grew by 0.1% MoM and 3.3% YoY. This would indicate that the Croatian inflation rate remains one of the highest in Europe, and also that it has yet to cool off.
If we were to look at the main drivers of growth, on the MoM basis, Services further grew by 0.5%, just like Non-food industrial goods without energy, while beverages and tobacco both grew at 0.2%. On the other hand, prices in Energy further decreased by 1.2%. Meanwhile, on a YoY basis, prices in the Services segment grew by 6.1%, in Food, beverages and tobacco by 3.2%, in Non-food industrial goods without energy by 1,5%, while in Energy they increased by 1.9%.
Croatian CPI YoY growth rate (February 2013 – May 2024, %)
Source: Croatian Bureau of Statistics, InterCapital Research
If we wanted to make comparisons to other European countries, then the HICP (Harmonized Index of Consumer Prices) has to be used. In general, the Euro area inflation rate (E) stands at 2.6% YoY in May 2024. In Croatia meanwhile, it stands at 4.3% YoY, and 0.2% MoM. Comparing it to other European countries, on the YoY basis, Croatia is 2nd to only Belgium, which is expected to record a YoY inflation rate of 4.9%, and these were the only 2 countries that recorded a YoY inflation rate of >4%. The closest regional peer, Slovenia, is expected to record an inflation rate of 2.5% YoY.
HICP comparison between Euro area countries (May 2024, YoY, %)
Source: Eurostat, InterCapital Research
Meanwhile, on a monthly basis, the largest increase is expected to be experienced by Malta and Cyprus, at 1.6% and 1.2%, respectively, which is quite an outlier and the only country to experience >1% MoM HICP. Following them there is only Portugal at >1% with MoM inflation expected to amount to 1.1%.
HICP comparison between Euro area countries (May 2024, MoM, %)
Source: Eurostat, InterCapital Research
Overall, the Croatian inflation seems to be still far above the 2% target set by the ECB. Inflation did get tempered in the Euro area overall, at 2.6% as already mentioned. However, what’s more worrying for Croatia is the fact that as part of the Euro area, if the inflation continues to decline in the area, and Croatian inflation remains elevated, interest rate cuts could fuel its growth even further. At the same time, the inflation is mostly seen in Services, which is mostly related to tourism activities, and in food, beverages & tobacco, which is more related to personal consumption. Neither of these categories is influenced directly by higher/lower interest rates. As such, it will be interesting to see how the situation will develop moving forward.
