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Food prices in Croatia soar 45% in just four years – why?

inflation in croatia

Inflation has remained a hot topic in Croatia, with food and services prices continuing to soar.

While debates rage on social media over whether retailers’ profits are to blame, deeper economic factors are coming into focus.

As Lider.hr reported, experts, entrepreneurs, and analysts weigh in on what’s behind the price hikes and how they impact everyday life.

Food Prices Lead Inflation Surge

According to entrepreneur and mathematician Nenad Bakić, Croatia has seen food prices rise 45% since 2020, compared to the EU average of 33%, according to Eurostat data.

Bread prices, for instance, have increased by 61% in Croatia versus 35% in the EU. Eggs have increased 63%, fruit 40%, meat 38% and vegetables 44%. 

Interestingly, Bakić dismisses the introduction of the euro as a cause, pointing out that the price gap actually narrowed slightly after its adoption.

“When the euro was introduced, the difference even decreased in the following four months. Did retailers suddenly become greedy? No, the growth has been almost consistently the same (compared to the EU). The main reasons for the increase are likely the high cost of the state and, in particular, rising wages (standards) and tourism, which generates higher demand.

However, it is notable that more expensive items are rising faster (compared to the EU) than cheaper ones: butter and olive oil compared to other oils; wine compared to beer, he stated on his Facebook profile.

Rising Demand for Quality Fuels Bread Price Hikes

Professor Marijana Ivanov from the Faculty of Economics highlights the bread and bakery sector as particularly lucrative, attracting strong domestic and foreign investment.

The shift in consumer preferences towards healthier, higher-quality bread has pushed prices further. Additionally, urbanisation and busier lifestyles mean more people rely on store-bought bread and ready-made meals, adding to the demand.

Modern bread production, with its focus on packaging, additives, and distribution, also raises costs. Ivanov notes that although inflation increases expenses for producers, it’s often consumers who bear the brunt of the higher prices.

Inflation and Household Budgets

Croatia’s relatively low average income means food remains a significant portion of household spending. As prices climb, people often cut back on meat and switch to staples like bread, eggs, and vegetables.

However, even these basics have become expensive, further straining budgets.

Government policies, including high VAT rates on food, compound the issue. With rising costs of energy, labour, and transportation, businesses have little choice but to pass these costs on to consumers.

EU Funds and Monetary Expansion: A Double-Edged Sword

While EU funds have helped bolster Croatia’s GDP growth, they’ve also contributed to inflation. Reddit analysts point to a massive increase in Croatia’s money supply—105% growth in M1 monetary mass since 2019, compared to 26% in the Eurozone. Despite real GDP growth of 18%, the disproportionate rise in money supply fuels price increases.

Croatia’s reliance on imports further complicates the situation. With limited domestic production, higher global prices are quickly reflected in local markets.

Meanwhile, industrial and food production continue to decline, raising questions about the country’s long-term economic resilience.

Balancing Profit and Regulation

Critics argue that oligopolistic structures in retail contribute to inflation, as domestic chains dominate around a third of the market. While some call for state intervention, others warn that heavy-handed regulation could backfire. Instead, they urge a focus on combating cartels and fostering competition.

For now, the government remains a beneficiary of rising prices, with VAT revenue swelling the state budget. However, unless systemic issues like stagnant production and monetary oversupply are addressed, inflation could remain a persistent challenge.

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