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UPDATE 1 - Croatia's Sept annual inflation lands near Erste's expectations

UPDATE 1 - Croatia's Sept annual inflation lands near Erste's expectations Author: Georgi Georgiev. License: All rights reserved.

ZAGREB (Croatia), October 16 (SeeNews) - Croatia's consumer prices rose by 0.8% year-on-year in September, close to the rate of increase expected by analysts at Austria-based Erste banking group, Erste said on Wednesday. 

September inflation has landed close to Erste's price growth expectations of 1%, the group said in an instant comment after Croatia's statistical office published the inflation data earlier on Wednesday.

In August, Croatia's annual consumer prices grew at the same annual rate of 0.8%.

Erste analysts said that they continue to see average inflation around 1% in 2019. 

The banking group also said that the announced cut in value added tax (VAT) rate by 1pp from January is far from certain given ongoing wage hike pressures in the public sector at the moment.

"Looking ahead, inflation pattern is seen as largely stable with prints around the 1% mark. Demand-side pressures should accelerate only marginally, reflecting a strong consumption profile, while supply side remains mostly sensitive to energy prices," Erste noted.

Erste added that mid-single-digit wage pressures could potentially translate into somewhat stronger wage push pressures given strong public syndicate pressures ahead of the election year. 

Croatia's government will propose to increase the salaries of all state and public servants by 6.12% in three steps next year, prime minister Andrej Plenkovic told parliament on Wednesday.

"In order to provide for this, and since we are now working on the 2020 budget draft, we will propose to delay the cut in the VAT rate by 1%, which was planned to take effect as of January 1," Plenkovic said.

The statistical office data showed that prices of food and non-alcoholic beverages, which have the largest weight of 27.81% in the consumer basket, rose 0.5% year-on-year in September, after growing by 0.3% in August.

Prices of housing, water, electricity, gas, and other fuels, with a 16.44% weight, added 3.2% in September - after increasing by 3.8% in the month before. Prices of transport services, which have a 12.43% weight, decreased by 3.1% in September, following a drop of 1.6% in August.

Croatia's average annual inflation accelerated to 1.5% last year, from 1.1% in 2017.