As of December 2024, Croatia experienced a CPI growth of 3.4% YoY, continuing its upward trend in line with robust economic activity. In contrast, Slovenia’s more moderate growth of 1.9% reflects a more stable economy and a more likely convergence toward the targeted 2% inflation.
Croatia
Once again, inflation continues to pose challenges for Croatia, with CPI growth amounting to 0.1% MoM and 3.4% YoY in December 2024.
Croatian CPI YoY growth rate (December 2014 – December 2024, %)
Source: Croatian Bureau of Statistics, InterCapital Research
Delving deeper into the data, services experienced an annual price increase of 5.6%, followed by food, beverages, and tobacco prices which rose by 4.8%. Energy prices increased by 1.6%, while non-food industrial goods (excluding energy) were 0.7% more expensive compared to the same period last year.
On a monthly basis, service prices rose by 0.6%, while food, beverages, tobacco, and energy prices each recorded a 0.4% increase. Meanwhile, non-food industrial goods excluding energy saw a 0.9% decrease.
These developments are a result of Croatia’s strong Q3 GDP growth – the highest relative growth in the EU – driven by a robust and prolonged tourist season, personal consumption (also expected to record a seasonal boost during the Christmas period), and increased public spending.
Although inflation is expected to cool down in 2025, it may take longer than anticipated to converge to the targeted 2% rate, and this is without accounting for any possible geopolitical or trade-war escalations which could further complicate the outlook.
Slovenia
Slovenia ended 2024 with an annual CPI of 1.9%, while the average annual price growth was 2.0%. At the monthly level, consumer prices were on average 0.3% lower in December.
Slovenian CPI YoY growth rate (December 2014 – December 2024, %)
Source: SURS, InterCapital Research
Looking more closely at the components of the CPI, service prices grew on average by 2.7%, while goods prices increased by 1.4%. Within goods, semi-durables recorded a 2.0% price growth, non-durables rose by 1.9%, while durable goods were 0.8% cheaper compared to the last year.
According to SURS, the largest impact on inflation – 0.5 p.p. – came from a 2.6% increase in the prices of food and non-alcoholic beverages. Additionally, higher prices in restaurants and hotels (+4.1%) contributed 0.3 p.p., while price increases in alcoholic beverages and tobacco (+3.6%), clothing and footwear (+2.2%), miscellaneous goods and services (+2.2%), housing, water, electricity, gas and other fuels (+1.3%) and transport (+1.2%) each contributed 0.2 p.p. to the overall inflation.
On a monthly basis, inflation was down by 0.3% in December 2024. The largest contribution to the deflation (0.3 p.p.) came from a 2.7% decrease in recreation and culture prices. An additional 0.1 p.p. was added by lower prices of clothing and footwear (-1.6%), while other price decreases contributed 0.2 p.p. to December deflation. Conversely, prices of restaurants and hotels rose by 0.8%, followed by food and non-alcoholic beverages (+0.5%) and transport (+0.4%), each contributing 0.1 p.p. to lower monthly deflation.
Therefore, Slovenia appears more likely to converge to the targeted 2% inflation in the short term compared to Croatia and many other European countries, thanks to its stable, well-diversified economy and more restrained public spending.
The harmonized index of consumer prices in the EU
Taking a quick look at the harmonized index of consumer prices (HICP), Slovenia recorded an annual growth of 2.0% and a 0.1% decrease on a MoM basis. Meanwhile, Croatia’s annual growth rate stood at 4.5%, with a 0.2% monthly increase.
HICP change for select EU countries (YoY, %, December 2024)
Source: Eurostat, InterCapital Research
When compared to the rest of the EU, Croatia surpassed Belgium as the country with the highest inflation rate. Overall, inflation in the Euro area amounted to 2.4% YoY and a 0.2% monthly increase, mostly attributable to rising prices of services (+4.0%) and food, alcohol and tobacco (+2.7%). These developments further complicate the convergence toward the targeted 2% inflation in the Euro area and add uncertainties regarding the size, timing, and likelihood of future ECB rate cuts.
