Inflation slows, and Ćorić says: Don't look for an alibi for new price increases

Inflation in Croatia slowed to 5.2 percent in May, after reaching 5.8 percent in April, the Croatian Bureau of Statistics announced. Deputy Prime Minister of the Republic of Croatia and Minister of Finance Tomislav Ćorić assessed that the latest data was encouraging, but at the same time warned that there was no justification for new price increases due to measures that will only be applied from the beginning of 2027.

Commenting on the structure of inflation, Tomislav Ćorić pointed out that energy products are still the largest generator of price growth.

“The energy product price segment is the most significant, 146.9 percent compared to last year. We have a slight slowdown compared to April, but still an extremely high growth rate,” he said.

He added that service prices are also growing, but at a slower pace than in previous months, while food and beverages recorded lower growth rates than last year. Industrial products, he pointed out, are recording a drop in prices.

Government expects further slowdown in inflation

Ćorić believes that the latest data shows a positive trend.

“These developments, although we are still talking about relatively high inflation, are encouraging. We believe that next month, and in the context of the Government's anti-inflation measures, we will see a further slowdown in inflation,” he said.

He added that in the next seven to eight months, the Government expects the Croatian inflation rate to approach the levels recorded by other Eurozone members.

However, he warned that the situation in the Middle East remains an important risk.

“What continues to worry us is the escalation of the conflict in the Middle East, on which the overall inflation rate depends,” he said.

"Whoever raises prices now is creating an alibi"

The Minister of Finance emphasized that the measures that the Government is preparing will not have any impact on this year's tourist season because they will only come into force on January 1, 2027.

“Anyone who is currently advocating price increases due to anti-inflation measures is misleading everyone. This is simply not true and is not based on anything,” he said.

He especially warned entrepreneurs who are trying to justify possible price increases with future measures.

“Anyone who is currently explaining to the public that their price should increase because someone announced something for next year is only creating an alibi for further completely unjustified price increases,” said Ćorić.

Tourist prices under the magnifying glass

Speaking about the tourist season, the minister pointed out that the prices of services, especially in tourism, will play an important role in the perception of Croatia among domestic and foreign guests.

According to him, the level of prices will depend not only on the success of this year's, but also future tourist seasons.

Although he is satisfied with the direction of inflation, Ćorić said that the Government will not be satisfied until price growth approaches the target level.

“We will continue until it reaches satisfactory levels, around two percent,” he emphasized.

The Government is preparing an anti-inflation package, and the tax treatment of lump sum recipients is also under attack

Ćorić said that the Ministry of Finance is open to talks with all interested parties and reminded them that the Prime Minister has assigned them to prepare a proposal for measures to further reduce inflation.

According to him, the public has not been talking much about the most important elements of the future anti-inflation package in recent weeks.

“The public has somehow lost the perception that a key segment of these measures is the rationalization of budget items, which is already affecting the economy's overheating. There is also our desire for administrative prices in most parts of the state administration to remain at the same level, and talks with social partners. These are the key elements of our anti-inflation package,” Ćorić said.

He also referred to the discussions on the taxation of flat-rate craftsmen, stating that their tax position is still among the most favorable in the European Union.

“Flat-rate craftsmen, especially those in the higher grades, still have one of the most favorable tax treatments in the European Union. They are taxed less by more than half as much as individuals who live in Croatia from paid employment. This is a very positive tax incentive for their business,” he said.

Only 93 cities and municipalities covered by the new flat-rate in tourism

Speaking about the changes related to the flat-rate tourism tax, the Minister of Finance said that the fact that the changes only apply to a small number of local government units is often overlooked in the public.

“Out of 555 local government units, 462 are not covered by the new flat-rate in tourism. We are talking about changes that affect exclusively the most developed municipalities and cities,” said Ćorić.

He added that the justification of the existing model of flat taxation in tourism can be discussed from several different perspectives, but that the actual scale of the proposed changes must be taken into account.

Ćorić replied to Mačkić: There is no need for him to eat a diploma

The Minister of Finance also referred to the recent statement of Velibor Mačkić, adviser to the President of the Republic of Croatia, Zoran Milanović, who said that he would "eat his diploma" if the Government's anti-inflationary measures yield the expected results.

Ćorić rejected the criticism and asserted that the public is ignoring a key part of the package of measures.

“I will return to the restrictive part of this package, which amounts to 80 million euros. The counter-argument is an increase in the standard of pensioners by 180 million euros. Rationalization at the state budget level amounts to 1.3 billion euros. How and in what way, I ask him and all the experts who have come forward in recent days, are we saving the budget in this way? That is not true,” said Ćorić.

The minister then directly called out Mačkić, assessing that his statements do not carry political or executive responsibility.

“Messages that come without any responsibility, and Mr. Mačkić is actually very laconic here, without any responsibility, because his function has not carried any responsibility for years, he touched on the government's anti-inflation measures. He can continue to do so because his messages carry no weight,” he said.

Finally, he also referred to Mačkić's statement about "eating a diploma".

“He certainly doesn't need to eat his diploma because I'm sure he ate and drank well at the conference in Dubrovnik where he said this,” said Ćorić.

Source: HRT