ZAGREB, 31 March 2022 - Gas is at the centre of the current global energy crisis which resembles the oil crisis of the 1970s, however, Croatia is in a somewhat better position than most European countries albeit the high price of gas and other energy sources cannot be avoided, a Gas Forum heard on Thursday.

The developments concerning the global energy sector are unprecedented and the war in Ukraine just worsened the situation in particular, the gas crisis, Danijel Žamboki,  the head of the management board of the Croatian Energy Regulatory Agency (HERA) said addressing the forum organised by the Energy Marketing organisation.

He underscored that in the "worst-case scenario" Croatia is in a significantly better position than other European countries because of its diversified supply direction with the LNG terminal on Krk Island and indications of increased domestic production.

In addition, until now, Croatian consumers have been protected against gas price hikes that are unprecedented in Europe.

The director of Croatia's largest gas distributor - Gradska Plinara Zagreb (GPZ) - Miroslav Živko, said that despite the crisis GPZ can ensure the continuation of business and he announced investments in green technology such as hydrogen.

Croatia also has great potential with geothermal energy sources.

Energy price hikes - a trigger for recession

Professor of Faculty of Economics, University of Rijeka - Faculty of Economics and Business University of Rijeka Nela Vlahinić Lenz warned that energy price hikes are a classic trigger for recession, which is usually preceded by high inflation and increased interest rates.

Official data regarding inflation in Croatia aren't that bad, said the professor and added the perception has become heightened.

Monetary authorities need to be concerned with how to restrict inflation without interest rates increasing and the economy going into recession.

She expects the main impact to be felt in the autumn when price increases are inbuilt in goods and services however inflation could increase in the spring.

She added that there had not been government measures to address the inflation in the first quarter most probably because the cabinet did not want to increase the government deficit and adversely affect the plans for accession to the euro area.

Vlahinić Lenz believes that economic growth this year will be significantly lower than planned and the question is what the government can still do to buffer the effects of the energy price hike. Europe is no longer running away from state control over energy prices and possibly subsidising households and the economy.

"Public finances are doing well and the government has room for that," concluded Vlahinić Lenz. 

Business: For more, check out our business section

ZAGREB, 26 March 2022 - The heads of state or government of the European Union's member states, who on Friday concluded their two-day summit meeting in Brussels, tasked the European Commission to propose an efficient solution to electricity price hikes.

The European Council calls on the European Commission "to submit proposals that effectively address the problem of excessive electricity prices while preserving the integrity of the Single Market, maintaining incentives for the green transition, preserving the security of supply and avoiding disproportionate budgetary costs," according to the Council's conclusions.

The Council of the EU and the European Commission are called upon "to reach out to the energy stakeholders, and to discuss, if and how, the short-term options as presented by the Commission (direct support to consumers through vouchers, tax rebates or through an "aggregator model/single buyer", State aid, taxation (excises and VAT), price caps, regulatory measures such as contracts for differences) would contribute to reducing the gas price and addressing its contagion effect on electricity markets, taking into account national circumstances."

After the discussion on the excessive energy prices, which took several hours, Croatian Prime Minister Andrej Plenković said that it was difficult to find a single solution which would suit all the member-states, having in mind that some of them are highly dependent on Russian Russian gas, oil and coal imports.

The EU has three goals: to ensure new supply routes for gas, complete and improve the gas and electricity interconnections throughout the Union, and provide direct support to consumers, he added.

ZAGREB, 22 March 2022 - As of Tuesday, a majority of filling stations in Croatia sell the "eurosuper95" gasoline at the price of HRK 11.84 per litre, which is a drop of HRK 1.16 compared to the prices over the previous seven days, while the price of the "eurodizel" diesel fell by 1.89 kuna to about 12 kuna.

Also, according to the the cijenegoriva.info portal, the prices of premium fuels fell after they were above HRK 15 per litre last week.

Last Thursday, the government adopted the directive to buffer the fuel price hike by doing away with the obligation for distributors to mix biofuel with diesel and petrol until the end of the year.

On 7 March, the government decided to lock margins on petroleum product transactions and temporarily reduce excise duties on diesel and gasoline in order to lower fuel prices.

As a result, the total margin on diesel and petrol was locked at HRK 0.75 per litre, and at HRK 0.50 per litre for blue-dyed diesel.

Amendments to legislation on excise duties have reduced excise duties by HRK 0.20 per litre of unleaded gasoline for 90 days, and the reduction for diesel is HRK 0.40 per litre.

On Monday, Prime Minister Andrej Plenković said that he expected a decrease in the fuel prices as a result of the lower average price on the Mediterranean market over the last seven days and of the set of the government's measures.

(€1 = HRK 7.564472)

ZAGREB, 3 March 2022 - Croatian Agriculture Minister Marija Vučković attended an extraordinary video meeting of EU agriculture ministers on Wednesday to discuss the potential impact of the conflict in Ukraine on the EU's agriculture and food sector.

Vučković expressed understanding of the situation in which Ukraine found itself, given Croatia's experience with the 1991-1995 Homeland War.

She mentioned the fundamental goals of the common agricultural policy, including ensuring a secure food supply at affordable prices and decent living conditions for rural communities across the EU.

Vučković said that monitoring the situation on the market was not enough anymore and that it was high time to activate emergency measures, considering increases in prices of energy and consequently of fertilizers, transport, livestock feed, and other related production costs.

"We have to be resolute and state clearly that, as European ministers responsible for ensuring sufficient food supplies for our populations, the security of the food systems is an absolute priority," the Croatian minister said.

The EU agriculture ministers called on the Commission to consider the use of all available tools and mechanisms within and outside the common agricultural policy to create conditions for a collective response to the current situation.

Agriculture Commissioner Janusz Wojciechowsk announced a series of steps and activities, including proposals for the activation of emergency market measures.

The ministers expressed solidarity with Ukraine and readiness to support it within and outside the EU humanitarian aid mechanisms.

For more, check out our politics section.

ZAGREB, 5 Feb 2022 - Economy and Sustainable Development Minister Tomislav Ćorić said on Saturday that anyone trying to fish in troubled waters by unjustifiably increasing prices during the euro changeover would be exposed.

"There will be continual monitoring by the state, and, I'm confident, by consumer associations as well. Those who fish in troubled waters and possibly increase prices without justification must be exposed," the minister told reporters during a visit to Split.

Speaking of inflation, he said that global markets had unfortunately started raising gas, electricity and oil prices and that the state could not influence it more significantly except by cutting taxes to alleviate the impact as much as possible after electricity and gas prices go up on 1 April.

"As of 1 April we will do our best so that the electricity and gas price increase is as small as possible," he said.

The minister also noted that this year's inflation would be slightly higher than last year's rate of 2.8%.

Ćorić said that he believed that if the situation on the energy market calmed down, Croatia would not experience the impact of price hikes as experienced by some other EU members.

Asked if inflation would have an impact on this year's tourist season, Ćorić said that if commodity prices increased by a few percentage points in the first half of the year, a likely rise in energy prices could lead to a rise in prices of services.

"I think it will have an effect (on this year's booking prices) but I hope that it will be reasonable and that we will not fish in troubled waters because that makes us less competitive," the minister said.

Asked if the government would cap fuel prices, Ćorić said the government would respond if the prices escalated.

January 25, 2022 - This year will mark the introduction of the Euro (€) in Croatia, two years after participating in the exchange rate mechanism since 10 July 2020. This set the exchange rate at 1 euro = 7.543450 kuna, with a band of fluctuation of 15%.

From September 5 onwards, retailers throughout the country should display dual prices with both kuna and euros. This measure will extend until the end of 2023.

According to the Croatian media, reactions from the general public surrounding the adoption of the Euro is one of hesitancy. Many fearing the adoption of the Euro may bring on additional inflationary prices.

This sentiment is understandable considering the country is also facing one of the highest year-on-year inflation of 5.5% (DZS).

The same fears were also expressed when 12 countries adopted the Euro in 1999. As many as 80-90% of consumers in Austria, Finland, Portugal, Netherlands, Greece, Germany, and Spain believed that prices were higher after the adoption.

But what could have led to these beliefs in euro-related inflation?

One reason is that consumers use approximated exchange rates for ease of conversions. For example, it can be more intuitive to use a rate of 8 kuna to 1 euro compared to the real rate, distorting inflation by about 6%.

Another, perhaps more calculable concern, is due to something called the rounding effect. This occurs when prices are replaced with more attractive, higher price points that frequently end with numbers 0, 5, or 9.

But are these fears justified, especially for the consumption of everyday goods? Responses from experts have so far has been encouraging.

Leading Croatian economists and even the European Commission have repeatedly assured the introduction of the Euro will not have significant effects on aggregate price levels. Researchers have also supported these claims, showing Euro-related inflation has a larger perceived (as opposed to actual) inflation on consumer prices, particularly for cheap, frequently purchased goods.

Two common sectors that can be used as examples to determine if, and how, the rounding effect may lead to an increase in average spending for consumers are: the restaurants and cafes sector, and the food and produce sector.

Food and Produce

Table 1 outlines the average price of 10 common everyday household items bought on a weekly basis. Conservative estimates are made based on prices averaged from figures at Numbeo and Prices World.

These figures are based on the assumption that Euro prices are rounded to the nearest attractive price ending with 0, 5, or 9.

Table 1

When 12 countries adopted the Euro in 1999, consumer prices saw an increase of 0.12% to 0.29%. Although the increase in the rounding effect in Croatia may be slightly higher in the hypothetical scenario above, in real terms, this is almost negligible. Based on these estimates, the total cost of these weekly goods is currently 265.18 kuna. After the adoption of the Euro, the conservative estimate for the same goods is €35.29 or 266.01 kuna. A difference of 0.83 kuna or a 0.31% increase. While the euro-related inflation for everyday groceries may not burn a hole in consumers’ pockets, what about a common leisure activity, enjoying a drink or meal at a restaurant or cafe bar?

This is likely where consumers would feel more of a pinch.

Restaurants and cafes

Back in January 2002, inflation for the restaurant and cafe industry in countries that adopted the Euro averaged a jump of 15.63%. In the following 3 months, these prices continued to increase at a rate of 5%. This was in contrast to countries that chose not to adopt the Euro, namely Denmark, Sweden, and the U.K. that only saw price increases of 1.01-2.18%.

Although the Euro was adopted by these countries in 1999 as outlined earlier, Euro notes and coins were only introduced 1 January 2002 which explains this trend. Until then, the old notes and coins of each country were still legal tender.

In neighboring Slovenia when the Euro was adopted in 2007, then governor of the central bank, Mitja Gaspari also shared a similar anecdote regarding the increase in coffee prices.

What might consumers expect from restaurants and cafes in Croatia? The following table uses similar predictions based on countries that previously adopted the Euro and includes a rounding effect.

Table 2

Using numbers from Numbeo and Price World, a meal at an affordable restaurant would average 59 kuna/person. With euro-related inflation, this could go up to 68.22 kuna/person.

The biggest jump is in mid-priced restaurants where an average meal increases from 220 kuna/person to 253.51 kuna/person.

There are a couple of explanations for this large increase in prices for restaurants and cafes, compared to food and produce.

The first scenario may be due to the switch acting as a motivator and coordination device for most, if not all, restaurant and cafe owners to switch to higher prices. This is also made possible through the widespread availability of menu prices online, leading to the rapid diffusion and adoption of a new Euro price point.

A secondary explanation for high inflationary prices can simply be attributed to the increase in anticipated menu costs due to the increase in marginal costs from raw ingredients. Since restaurants and cafes purchase these in bulk, costs accumulate relatively quickly and are passed down to the consumer.

Will these effects last?

The good news is for most euro-adopters in the long run, these spikes were largely temporary as people adjust to the new currency. The Croatian central bank is also giving inhabitants a longer time horizon of over a year to make this adjustment with dual prices lasting through 2023.

For more, check out our dedicated lifestyle section.

June 4, 2020 — Will the cost of hospitality services in Croatia drop because of the coronavirus crisis?

Many hotels are still closed in early June, and restaurant terraces are mostly empty, according to Zadarski List. Yet there are no discounts, and prices remain fixed. This year there is no overbooking, but there is almost no collapse in accommodation prices. What gives? The director of Lošinj's Tourism Board Dalibor Cvitković offered an explanation.

"The recommendations at our destination are that there is no need to lower prices compared to the same period last year, but to provide additional services, such as parking or something similar," he said. "There will be offers, like six days plus one gratis, or three people, then the fourth gratis, and the tourist board will offer a free ferry in September, but there is no collective reduction of prices."

Cvitković said Lošinj keeps prices steady because service is at a high level. Bookings are at 30 to 40 percent of last year's figures.

"We are waiting for June 15, it is our D-day because the German government has recommended to its citizens not to go anywhere until then, and the Germans are our main market," he said.

The price of an apartment for four people on Lošinj in the peak season ranges from 80 to 100 euros, and for a hotel room, depending on the view and the hotel, between 150 and 200 euros. In other words, about the same as last year.

In Split, prices range from HRK 600 to HRK 4,000 per night. In case you book an apartment for tonight, for two adults and two children in Crikvenica, in a hotel it will cost you around HRK 1,400 and in family accommodation from HRK 500 to HRK 2,000.

Lošinj and other destinations think September can offer a bounce-back, with the pandemic already waning a few months and restrictions completely eased.

The president of the Family Tourism Association at the Croatian Chamber of Commerce, Martina Nimac Kalcina, said that there are price reductions, but it depends in which parts of Croatia. Maybe not in Istria and on Lošinj, but Croatia has a sea all the way to Dubrovnik.

Prices across the board are lower about 15 percent, she said, but the distribution isn't even. Istria's prices have barely fallen, while other parts of Croatia's coast have seen dips of around 20 percent.

"Owners of luxury villas are mostly reluctant to lower prices, except as discounts as part of certain promotions," Nimac Kalcina said. "Domestic guests, if they come directly to the owner of the facility, can certainly lower the price, considering that there will be unfilled facilities this year."

She predicted domestic guests could easily find available accommodation at prices 50 percent lower than last year.

Nedo Pinezić, a well-known tourist expert and employee, especially of family accommodation, said supply and demand dictate prices, not a mutual agreement among all accommodation owners. This oscillation started in 2016, as demand rose faster than supply, leading to a jump in prices.

Stagnation settled in last year, in the first half of July, Pinezić said, leading to a chain reaction of price cuts across the market. Most cuts start with the highest-end accommodations and trickle down. Pinezić called it the "greatest opportunity for discounts."

"In the corona season of 2020, we still don’t know what will happen to demand or prices," he said. "For now, we speculate that July, August and September will be "peaceful months" without the spread of the infection and that summer trips to the sea will be available. However, this summer there will be no guests from overseas destinations, nor those who will not be able to get a vacation, nor those who are in some way affected by the corona and post-corona crisis.

"The volume of demand will decrease, especially from more potent markets, which will increase the pressure to lower prices," he concluded.

Property prices in Croatia are a popular talking point, and just as with everything else in the country, there are usually huge variations depending upon the area of the country you choose.

Dubrovnik is well known for its extortionate property prices, with Split also quickly following suit, with Zagreb and the capital city's surroundings not yet in the same range, but being quickly on the rise.

As Poslovni Dnevnik writes on the 1st of November, 2018, despite the country's ever-concerning demographic crisis and the steady flow of emigration of Croatia's often very talented youth, coupled with more stringent lending standards, the general demand for apartments and other types of homes isn't decreasing, yet. For example, apartment prices in Zagreb are already close to the formerly historically high levels they were at around ten years ago when it was far from abnormal to pay over 2,000 euros per square metre for a relatively average apartment in an older building in the city.

While real estate prices continue to rise only very slightly throughout the European Union as a whole, the increase in property prices in Croatia compared to the EU average is, probably surprisingly to some, rather striking. Property prices in Croatia rose by an impressive 8.5 percent in the first quarter of this year when compared to the growth seen during the same period last year. In the last quarter of 2017, prices rose by 7.6 percent, according to a report by tportal.

Njuškalo conducted its monthly survey back in September this year, and the results quite clearly show that apartment prices in Croatia rose by 7.13 percent year-on-year, and house prices grew slightly more than four percent.

The most expensive apartments can be found, rather unsurprisingly, in Croatia's southernmost city, Dubrovnik, where the average market price is about 3,811 euros per square metre, in Split, prices stand at 2,744 euros per square metre, while the average in the capital city of Zagreb, while steadily on the up, remains significantly lower, at 1,917 euros per square metre.

The popular Dalmatian city of Zadar stands out in terms of growth, and the average square metre in an apartment increased by 12 percent, and is now generally sold at 2,075 euros.

Want to find out more about property prices in Croatia, business, investments and the general state of play of Croatia's domestic economy? Make sure to follow our business page.

It doesn't come as much of a surprise...

While the price of alcohol and cigarettes have shot up, costs relating to the healthcare service have increased alongside them.