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Croatia Watch: Inflation at 3% in 2024
According to the December preliminary estimate, prices of goods and services for personal consumption increased by 0.1% mom and 3.4% yoy, as measured by the CPI. This marks the third consecutive month of accelerated annual inflation. As anticipated, the average annual increase in consumer prices for 2024 amounted to 3.0%.
In December consumer price growth 3.4% yoy
According to preliminary estimated, based on 80%-90% of processed data, with a monthly increase of 0.1% compared to November, the annual growth rate of consumer prices amounted to 3.4% in December. This represents the highest growth since April 2024.
In December, on a monthly basis and by key components of the index, prices for Services increased by 0.6%, after three consecutive months of decline. Prices also rose for Energy and Food, Beverages, and Tobacco (both up by 0.4%). In contrast, prices of Non-Food Industrial Products Excluding Energy fell by 0.9% compared to November 2024.
On an annual basis, average Service prices continue to show significant growth. Compared to December 2023, prices in this category rose by 5.6%, contributing 1.46 percentage points (pp) to the annual inflation rate. This was followed by growth in the Food, Beverages, and Tobacco category, where the estimated annual rate of change was 4.8%. As evident from monthly trends, food inflation has accelerated in recent months, driven by unfavorable base effects as well as ongoing price pressures, such as rising costs of fruits, vegetables, and certain raw materials on the global market. We estimate that this category contributed an additional 1.51pp to the overall inflation rate. Therefore, these two categories (Services and Food) were the largest contributors to consumer price growth in December, as they have been throughout the year.
Finally, Non-Food Industrial Products Excluding Energy rose by 0.7% compared to December 2023, while Energy prices, after six consecutive months of decline, recorded an average price increase. In December 2024, average Energy prices were 1.6% higher than in the same month of the previous year. The strengthening price growth momentum in the last quarter, driven by adjustments to administratively regulated prices for electricity, gas, and household heating, as well as unfavorable base effects, contributed to this trend.
More detailed information will be available on January 16, when the final data on consumer price growth for goods and services will be published.
Average inflation in 2024 aligned with our expectations
With the release of the latest data, the statistics for the entire year are now complete. In 2024, consumer price growth, as measured by the Consumer Price Index, averaged 3.0%. Compared to the previous year, Service prices rose by 5.9%, Food prices by 4%, Non-Food Industrial Products Excluding Energy by 1.4%, while Energy prices decreased by 0.9%.
What to expect in 2025?
At the start of 2025, annual inflation could accelerate further, primarily reflecting unfavorable base effects due to relatively low monthly changes observed in January and February of the previous year.
Examining trends in specific aggregates, the monthly price increases at the end of 2024, coupled with the gradual removal of administratively regulated prices, suggest that annual energy price growth is likely to return to positive territory in 2025. Annual food price growth is also expected to continue and could slightly exceed last year’s levels given recent trends.
Over the course of the year, the deceleration of core inflation may shift from being driven by industrial goods inflation to services inflation. This shift is expected as service prices, which have experienced strong growth in recent years, face reduced potential for further convergence toward EU averages in certain subcategories. On the other hand, the moderation of inflation in this aggregate could be constrained by continued economic growth supported by consumer spending and confidence. Planned tax relief measures and increases in the minimum wage will further bolster domestic demand in 2025.
We anticipate an average inflation rate of 2.6% in 2025. Driven by robust demand, core inflation is expected to remain above the overall inflation rate through 2026.
Risks surrounding our projections remain significant. Beyond domestic factors such as the intensity of local demand, major external risks include geopolitical uncertainties that could, for instance, once again disrupt supply chain efficiency. Additionally, the potential indirect effects of trade policies under the new U.S. administration should not be overlooked.
HICP – The Gap Remains Noticeable
According to the preliminary estimate of the Harmonized Index of Consumer Prices, inflation in Croatia at the end of the year stood at 4.5%. On average, inflation for 2024 was estimated at 4%.
In contrast, inflation in the euro area last year was 2.4%. Alongside Belgium, Croatia recorded the highest annual consumer price growth among the countries of the single currency area. For the first time since April of last year, the inflation rate gap between Croatia and the euro area exceeded two percentage points in December. This divergence is primarily due to the relatively higher significance of food in Croatia's consumer basket and price changes in the services category.
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Zrinka ZIVKOVIC-MATIJEVIC
Croatia Zrinka is the Head of the Economics and Financial Research in Croatia. She has been part of research team since 2004 and in 2009 became the Head of Croatian Research team. She holds a Master of Science degree in Banking and Public finance. She is particularly interested in a public finance and structural issues that are influencing long-term and sustainable growth. Zrinka is author or co-author of several professional publications. In 2019 she was voted as Chairman of Chief Economist Club with Croatian Banking Association on two year mandate. In free time she likes to discover new countries and cultures.
Petar BEJUK
Croatia Petar joined the Economics and Financial Research team as a student in late 2021. He graduated from the Faculty of Economics in Zagreb in 2023. During his studies, he discovered his interest in macroeconomics, especially monetary policy. In his work so far, his interest has broadened to a whole range of areas of economic importance, where he would like to improve his economic knowledge and analytical skills. He enjoys spending his free time with his family and friends.
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