As of September 2024, Croatia experienced higher inflation, with HICP at 3.0% YoY driven by tourism and rising service and food costs, though easing is visible. Meanwhile, Slovenia, with HICP at 0.7% YoY, successfully controlled inflation with effective measures. Nevertheless, CPI growth is approaching the ECB’s 2% target overall, indicating progress toward price stability.

Croatian Inflation Trends

In September 2024, Croatia’s inflation remained relatively stable. CPI increased by 0.3% MoM and 1.6% YoY. Stability resulted from balancing rising service prices and prices of food, beverages, and tobacco, stagnant non-food industrial goods without energy prices, while energy prices recorded a significant decrease. Accordingly, key factors in this trend include:

• Service prices, which saw a 6.2% YoY increase, continue to drive inflation in the tourism and hospitality sectors.
• Food, beverages, and tobacco prices rose by 3.2% YoY, putting pressure on consumer costs.
• Non-food industrial goods without energy, remained relatively stable, with a modest increase of 0.6% YoY.
• Energy prices, notably declined 7.3% YoY, providing significant relief from previous inflationary pressures.

On an MoM basis, prices for food, beverages, and tobacco increased by 0.2%, and non-food industrial goods without energy rose by 2.9%. Meanwhile, service prices fell by 0.7%, and energy prices decreased by 2.0%.

Croatian CPI YoY growth rate (August 2014 – September 2024, %)

Source: Croatian Bureau of Statistics, InterCapital Research

Slovenian Inflation Trends

By September 2024, Slovenia’s inflation rate continued to decline. According to the latest data from the Statistical Office of Slovenia, the CPI increased by 0.6% YoY, while monthly inflation in September on average stayed the same compared to August. This represents a further inflation slowdown compared to the previous two years of heightened inflationary pressures driven by post-COVID effects, wars in Ukraine and the Middle East, commodity shocks, and other macroeconomic factors, highlighting the effectiveness of measures taken to control rising prices.

Key details include:

• Food prices, despite a slight increase, of 1.5% YoY, no longer exert the same inflationary pressure as they did earlier in the year.
• Non-durable goods saw a 1.1% YoY decrease, indicating a relatively stable market for essential consumer goods, with reduced cost pressures benefiting consumers.
• Services prices also contributed to modest inflation, increasing 3.9% YoY, but overall, the pace of price increases has decelerated, indicating more balanced cost dynamics across key sectors.
• Housing and utilities saw a decrease of 6.1% YoY, reflecting lower energy costs and a stabilization in housing demand, which significantly contributed to easing overall inflationary pressures.

This very modest yearly increase in inflation shows Slovenia’s success in stabilizing its economy and keeping inflation under control.

Slovenian CPI YoY growth rate (August 2014 – September 2024, %)

Source: SURS, InterCapital Research

Croatia and Slovenia in the European Context

The Harmonized Index of Consumer Prices (HICP) provides a comparative measure of inflation across EU member states, indicating broader economic trends within the Eurozone. As of September 2024, Croatia’s HICP rose by 3.0% YoY, whereas Slovenia’s HICP stood at 0.7% YoY, while the Euro area average was 1.8%. The impact of the tourism season largely drives Croatia’s inflation above the Eurozone average. In contrast, Slovenia’s modest inflation, which remains below the average, suggests successful control measures to keep price pressures in check.

HICP comparison between select EU countries (September 2024, YoY, %)

Source: Eurostat, InterCapital Research

In the broader European context, Croatia’s higher HICP reflects ongoing inflationary pressures, particularly in services and food, although there are signs of easing. Slovenia’s lower HICP suggests greater success in managing inflation, with notable improvement since earlier in the year, indicating effective economic measures. This contrast highlights varying inflationary dynamics within the Eurozone, with Slovenia potentially benefiting from better control policies and/or favorable conditions. Across the Eurozone, the highest inflation is seen in Belgium (4.5%), the Netherlands (3.3%), and Estonia (3.2%), while the lowest is in Ireland (0.2%) and Lithuania (0.4%).

Conclusion

In conclusion, Croatia and Slovenia’s inflation trends in September 2024 reflect different economic conditions and policy responses. Croatia faces higher inflation driven by tourism and rising service and food costs, though there are signs of easing. In contrast, Slovenia’s effective measures have kept inflation significantly lower, showcasing its success in price control. Although both countries aim for greater price stability, their divergence underscores the impact of distinct economic strategies and policy impacts. While CPI growth nears the ECB’s 2% target, achieving convergence remains challenging amid global trends of reducing interest rates. Close monitoring of inflation remains crucial for effectively addressing ongoing pressures and ensuring long-term stability.