Croatia’s inflation expected to slow in May as food and services price growth eases

Osijek (Photo: Roko Poljak /CC BY-SA 4.0)

ZAGREB, 31 May (Hina) – Croatia’s inflation rate is expected to slow in May, driven by a moderation in food and services price growth, according to Croatian National Bank (HNB) Governor Boris Vujčić.

Speaking on the sidelines of the HNB’s 32nd International Economic Conference in Dubrovnik, Vujčić said he expects inflation to ease from April’s annual rate of 5.8%.

He highlighted an anticipated slowdown in food price growth to below 3%, alongside weaker growth in services prices. According to Vujčić, the gradual easing of inflationary pressures in the services sector could continue in the coming months, provided higher energy costs do not spread into other areas of the economy.

Energy prices remain the largest contributor to inflation, he noted, with costs continuing to rise and staying at elevated levels. Their future direction will largely depend on geopolitical developments.

“It is positive that the other components of inflation are slowing, and therefore we expect inflation to decline in May,” Vujčić said.

Croatia’s Bureau of Statistics is due to publish its preliminary estimate for May inflation on 2 June.

The governor said geopolitical developments will also determine which of the HNB’s inflation scenarios for 2026 ultimately materialises. In particular, he pointed to the importance of developments affecting trade flows of oil, gas and fertiliser components through the Strait of Hormuz.

Markets have reacted positively to indications of a potential agreement between the United States and Iran, although Vujčić noted that the situation continues to change rapidly.

Asked about the Croatian Government’s recently announced anti-inflation package, Vujčić declined to comment, noting that the HNB was not involved in designing the measures. He said the central bank would analyse their effects at a later stage, as it had done with previous government anti-inflation initiatives.

On economic growth, Vujčić said Croatia continues to outperform many eurozone economies, although growth is slowing across Europe. Croatia’s economy expanded by 2.2% year-on-year in the first quarter, while current HNB indicators suggest growth could accelerate to around 2.5% in the second quarter.

The outlook remains broadly in line with the central bank’s annual GDP growth forecast.

The Dubrovnik conference marks Vujčić’s final appearance as HNB governor before taking up his new role as Vice-President of the European Central Bank (ECB) on Monday.

He stressed that ECB decisions, including those on interest rates, are based on eurozone-wide data rather than national considerations and are taken according to the economic information available at the time.

The two-day conference brings together leading economists, academics, central bankers and financial sector representatives to discuss key economic issues. This year’s agenda includes monetary policy, central bank independence, digital currencies, housing affordability, financial stability, public debt and emerging digital assets such as stablecoins.

Addressing housing affordability, Vujčić described it as a growing challenge across Europe, including in Croatia. He said the issue is influenced by both supply and demand factors, as well as foreign demand in countries such as Croatia, Greece and Portugal, which can contribute to higher property prices.

Strong economic growth, rising employment and an increasing number of foreign workers have also boosted demand for housing. At the same time, a significant number of residential properties in Croatia remain unoccupied or are held purely as investments, reducing housing availability and affordability.

Vujčić noted that the HNB introduced macroprudential measures last year covering both cash and housing loans, adding that experiences from other countries would continue to be examined as policymakers seek solutions to housing affordability challenges.