Dombrovskis: Inflation in Croatia is lower than in countries outside the Eurozone

The Vice President of the European Commission, Valdis Dombrovskis, said on Monday that the Commission is aware of concerns about rising prices after the introduction of the euro, but he pointed out that the level of inflation in Croatia is comparable to the level in the Eurozone, and lower than in the countries of Central and Eastern Europe that are outside the Eurozone.

Valdis Dombrovskis met in the government building today with Prime Minister Andrej Plenković and the Ministers of Finance and Economy, Marko Primorac and Davor Filipović.

The main topics of discussion were Croatia's entry into the Eurozone, inflation and the national recovery and resilience plan.

“We informed the vice president about the economic growth in the last year, being after that of 2021, when our economic growth was 13.1 percent, the second highest GDP growth among the members of the Union. In this year, according to all indicators, we expect growth for 2022 to be around 6 percent, which is also very good and, in our opinion, encouraging considering all the challenges we had through the consequences of Russian aggression on Ukraine and its implications for the energy crisis, food crisis, inflationary pressures in Croatia, Europe and globally,” said Prime Minister Plenković.

“Regarding prices, we are aware of certain concerns, especially in the service sector, and we know that the Government is responding to these concerns. Credible measures have been put in place to limit this price rise, to express prices in two currencies and to increase transparency,” said Dombrovskis.

Dombrovskis: Inflation in Croatia is lower than in countries outside the Eurozone

The Vice President of the European Commission Valdis Dombrovskis stated that the Commission is aware of concerns about rising prices after the introduction of the euro, but he pointed out that the level of inflation in Croatia is comparable to the level in the Eurozone, and lower than in the countries of Central and Eastern Europe that are outside the Eurozone. Dombrovskis said this at the Croatian National Bank after a meeting with Governor Boris Vujčić on the introduction of the euro in Croatia.

Dombrovskis is in Croatia on the occasion of tomorrow's conference organized by the Government and the Croatian National Bank titled "Croatia – the 20th member of the Eurozone", and he used the opportunity to congratulate citizens and authorities on the great achievements related to entry into the Eurozone and the Schengen area. He also said that the process of introducing the euro was well prepared and that it went smoothly in all segments. However, he added that the Commission is aware of concerns about rising prices in certain sectors and by certain service providers.

He pointed out the measures the Government is using to fight against this, such as a price comparison sheet that should provide transparency, the accession of business entities to the Code of Ethics, as well as inspections that can result in fines for those who used the introduction of the euro to unjustifiably raise prices. He added that one of the important elements in the introduction of the euro is consumer protection, which includes price monitoring, and great attention is paid to these aspects.

“Therefore, from the perspective of consumer protection, it is important to ensure that there is no unjustified price increase, and the Croatian authorities are doing exactly that,” he asserted.

Also, unlike before, it is clear that the introduction of the euro in Croatia took place at a time of ubiquitous and excessive inflation, but Dombrovskis noted that the level of inflation in Croatia (12.7 percent for December measured by the Harmonized Index of Consumer Prices - HICP) is comparable with that of the Eurozone as a whole (9.2 percent).

“At the same time, if we compare inflation in Croatia with price growth rates in Central and Eastern European countries that are outside the Eurozone, we see that inflation in Croatia is lower,” he pointed out.

Vujčić: The process of switching to the euro was technically flawless

Vujčić stated that he and the Vice President of the Commission summarized the process of switching to the euro in Croatia, and, as Vujčić assessed, it was successfully completed.

“The process of switching to the euro ended very well, technically it was done flawlessly, we had no problems,” said Vujčić. He assessed that, after a two-week period of dual circulation, everyone has now slowly gotten used to the euro as a means of payment.

Answering a journalist's question about the rise in interest rates and its impact on loans, Vujčić pointed out that the fight against inflation is being waged primarily with the instrument of raising interest rates, so it can already be seen, when the European Central Bank started raising interest rates this summer that they have risen by 2.5 percentage points.

He stated that in Croatia there are approximately 200,000 housing loans and about 100,000 non-housing or cash loans, with the majority of the ones just mentioned with fixed interest rates, and this increase in interest rates does not apply to them. As he added, there are only about "20 or so percent of non-residential loans with a variable interest rate, and not all of them are linked to the Euro Interbank Offered Rate."

“As for housing loans, we have a situation where about half of them are subject to changes in interest rates. Some have partially fixed interest rates, so what is happening with interest rates will not apply to them again. For those who already have variable interest rates, for a medial loan, one percentage point increase in the interest rate would mean approximately a 4-percent increase in the loan servicing rate, so everyone can see approximately how much it is,” explained Vujčić.

Source: HRT