According to the first flash estimate of the Croatian CPI, in April 2024, it grew by 0.7% MoM, and 3.7% YoY. Furthermore, the Croatian HICP, which allows comparisons to other European countries, grew by 1% MoM, and 4.7% YoY, being 2nd to only Belgium on the YoY basis.
The latest CPI flash estimate for Croatia has been released on Tuesday. In the release, we can see that the Croatian CPI grew by 0.7% MoM and 3.7% 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, Non-food industrial goods without energy grew by 1.2%, while Services and Food, beverages and tobacco both grew at 0.7%, respectively. On the other hand, prices in Energy decreased by 0.7%. Meanwhile, on a YoY basis, prices in the Services segment grew by 6.3%, in Food, beverages and tobacco by 4.5%, in Non-food industrial goods without energy by 2%, while in Energy they increased by 1.1%.
Croatian CPI YoY growth rate (February 2013 – April 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 stood at 2.4% YoY in April 2024. In Croatia meanwhile, it stood at 4.7% YoY, and 1% MoM. Comparing it to other European countries, on the YoY basis, Croatia was 2nd to only Belgium, which recorded 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, recorded an inflation rate of 3% YoY.
HICP comparison between Euro area countries (April 2024, YoY, %)
Source: Eurostat, InterCapital Research
Meanwhile, on a monthly basis, the largest increase was experienced by Malta at 2.8%, which is quite an outlier and the only country to experience >2% MoM HICP. Following them are Estonia and Netherlands at 1.1%, respectively, and then Greece, Croatia and Portugal, each at 1%.
HICP comparison between Euro area countries (April 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 2.4% 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.
