Croatia posts first annual CPI inflation since June 2015

Croatia posts first annual CPI inflation since June 2015
By Akin Nazli in Belgrade January 16, 2017

Croatia's consumer prices rose 0.2% y/y in December, pointing to the first annual increase since June 2015, the statistics office said on January 16. The 0.2% y/y increase was the highest annual rise since November 2014. 

CPI deflation in Croatia bottomed out with a 1.8% annual decline in May and has been on an upward trend in the last seven months thanks to rising oil prices and strengthening private consumption backed by the favourable tourism season in summer 2016.

On a monthly basis, Croatia’s consumer prices declined by 0.2% in December after remaining unchanged in the previous month. The highest decrease was recorded in the clothing and footwear sector (7.9% m/m) due to seasonal discounts.

Food and non-alcoholic beverage prices, which have the largest weight in the consumer basket, rose 0.1% on a monthly basis in December. Prices of housing, water, electricity, gas and other fuels, which have the second largest weight in the consumer basket, increased by 0.3% m/m in the month, while transport charges, with the third largest weight in the basket, rose 1.2% on a monthly basis. 

The Croatian government expected consumer prices to resume growth in 2016 and forecasts annual inflation of 0.1%, according to the 2016 budget adopted by the parliament on March 21. However, the International Monetary Fund (IMF) cut its 2016 average CPI inflation forecast for Croatia to an annual deflation of 1% on October 4.

The Croatian Central Bank (HNB) forecasts that annual inflation will increase to 1.6% in 2017, according to Total Croatia News. The HNB said last month that given the expected relatively low inflation and the slow recovery of lending to the private sector, fiscal policy will continue its expansionary nature and Croatia will continue to maintain a stable currency exchange rate against the euro, according to EBL News.