Inflation rises again in June

Inflation continued to rise in June for the second consecutive month. 

The price of goods and services increased by 3.7% on an annual basis last month, the State Statistics Bureau said on Tuesday. This follows a 3.5% increase in May. 

Again, the biggest price rise was seen in services, followed by food, beverages, and tobacco products. The government and business leaders say they are not too concerned and believe inflation will balance itself out by the end of the year, landing on 3% for 2025.

Finance Minister Marko Primorac says it is the annual picture that matters.

"We expect that the average annual rate will be 3% this year and the Finance Ministry continues to stand by this projection. As the year comes to an end, inflation will slow down,” said Primorac.

The current rate is the result of a number of factors, including the beginning of the high tourism season, says Irena Weber, the head of the Croatian Employers' Association.

"This is a fluctuation that happens every year at this time. This is a seasonal effect,” said Weber.

Estonia and Slovakia were the only EU countries where inflation outpaced Croatia's rate.

As the tourism season gains momentum, competitiveness is the factor that is worrying many. High prices could come back to haunt Croatia in the next few years. It is a matter of perception, says Robert Pende from the Ministry of Tourism.

"When you become less competitive, it is not a problem right away. Later, it becomes a reputational problem,” says Pende.

However, he adds that tourism is an "experience" industry and affordability is not the key factor for some customers.

Economist Ljubo Jurčić points out that prices in top destinations like Rome and Florence are on par with those in Zagreb.

Former tourism minister, Pave Župan Rusković, says high prices are not the problem but whether the quality of the good or service matches the price, especially when it comes to four and five star hotels.

Hospitality business owners blame their suppliers for the price hikes, claiming they have no choice but to do the same.