New food price caps are in effect as part of plan to fight inflation

Croatia has introduced price caps on 30 food and hygiene products in an effort to tackle inflation. 

The measure is part of the Government's latest inflation package and stems from an agreement with major supermarket chains to cut prices on certain items voluntarily. The prices of the 30 products should be cheaper by 10 to 53 percent, depending on the product. The products include cooking oil, milk, toothpaste, and shampoo, to name a few. Under the deal, all of the product should be clearly marked on supermarket shelves.

Some critics have raised concerns that the deal with the big chains will hurt small retailers. Prime Minister Plenković rejects the idea. The Government has capped the prices of some basic items before and it did not have this effect, he says.

"Not only were the shelves stocked but it drove competition and prices went down further. The point is to create a united front to fight inflation,” said Plenković.

A clearer picture will emerge over the next few months how much these price caps will contribute to curbing inflation.

"Besides this deal, a much more important factor is that the prices of agricultural and food products in the Eurozone have been declining,” says economist Hrvoje Stojić.

Economists Mladen Vedriš and Ljubo Jurčić say measures like these will work in the short term but may not be effective in the long run.

"This package will certainly have positive effects but it will not impact our quality of life," says Vedriš.

"In the short term, these are good measures. How much they can help, is a different issue," adds Jurčić.

According to the Croatian Employer's Association, when taking a look at the supply chain, Croatia's 30 largest retailers did not turn a significant profit from inflation.

"Not only is there no correlation, analysis shows that gross profit margins were quite comparable in 2021 and 2022 versus pre-covid. That's neither good nor bad, it is just a fact,” explains economist Andrej Grubišić.

The data shows that of the 30 billion euros consumers spent at supermarkets over the past five years, 86 percent went to suppliers, 8 percent to taxes, 6 percent to employee salaries, and only 1 percent toward interest and dividends.