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Croatia's cbank lifts 2022 inflation f'cast to 3.5-4%

Author Annie Tsoneva
Croatia's cbank lifts 2022 inflation f'cast to 3.5-4% Photo: Croatian central bank, HNB

ZAGREB (Croatia), January 19 (SeeNews) - Croatia's central bank has lifted its 2022 inflation forecast to 3.5-4% from originally projected 2.4%, after figures for the last two months of last year came in higher than expected, it said on Wednesday.

The new forecast is based on the assumption of 10 to 30% growth of natural gas prices and 5 to 15% rise in electricity prices, with inflation expected to calm down by the end of the year, the central bank said in an statement emailed to SeeNews.

However, there are other factors that could additionally fuel inflation like a stronger growth of personal consumption and salaries, a fresh rise in the global prices of crude oil and other raw materials and higher-than-projected inflation in Croatia's main trade partners.

Croatia's average annual consumer price inflation sped up to 2.6% last year from 0.1% in 2020, the national statistical office said on Monday. In December alone, inflation quickened to 5.5% year-on-year, compared with 4.8% in November.

Last month, the central bank said it expects average annual inflation of 2.4% for 2021 and approximately the same rate for 2022.

Last week, the government said it lifted its average annual inflation forecast for this year to 3.5% from 2.6% projected in the budget bill to reflect a rise in food and energy prices.

Croatia aspires to switch to the euro currency as of January 1, 2023 and rising inflation could jeopardise these plans. One the convergence criteria for joining the euro area requires the candidate country to have average inflation not higher than 1.5 percentage points above the rate of the three best performing member states.

Last year, the inflation rate in the eurozone was rising at a pace similar to Croatia's but economic recovery does not evolve identically and does not take place in all EU countries, and therefore the divergence of inflation rates among EU member states is getting wider, the central bank said.

“For this reason, most probably we will have to wait until May when inflation data of each EU member state will be available and when the European Commission has to define the three countries with the best inflation indicators,“ the central bank said.

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