While most of the European Union is recording a decline in inflation and a calming of prices, Croatia continues to face rising living costs.

The latest data from Eurostat for May 2025 reveal that annual inflation in the eurozone fell to 1.9%, and in the entire EU to 2.2%. At the same time, Croatia recorded an inflation rate of as much as 4.3%, twice the European average and among the highest in the Union. Why is Croatia, despite the common currency and open market, going against the European trend?

European decline in inflation: energy and price stabilization

The decline in inflation in the eurozone and the EU is primarily the result of lower energy prices, but also the stabilization of prices for industrial products and services. In May 2025, energy even had a negative contribution to inflation (-0.34 percentage points), while the prices of food, alcohol, and tobacco rose moderately (+0.62 percentage points). In most member states, especially in France (0.6%), Ireland (1.4%), and Cyprus (0.4%), inflation has practically disappeared.

Croatia above average: what sets us apart?

Unlike the European average, Croatia recorded inflation of 4.3% in May 2025, which is higher than in Germany (2.1%), Italy (1.7%), or Spain (2.0%). Only Romania (5.4%), Estonia (4.6%), and Hungary (4.5%) had higher rates.

Main reasons for rising prices in Croatia?

Services and tourism

The biggest contribution to rising prices in the eurozone comes from the services sector, and this trend is even more pronounced in Croatia. The tourist season, which starts earlier and lasts longer, strongly drives up the prices of accommodation, hospitality, and transport. Domestic demand, as well as the large number of foreign guests, allows businesses to raise prices.

Food and beverage prices

Croatia continues to record above-average growth in the prices of food, alcohol, and tobacco. This is partly a consequence of import dependence, but also of weaker competition in the market, which allows retailers higher margins.

Structural weaknesses

The Croatian economy is less diversified, and the labor market continues to suffer from a labor shortage, which raises labor costs, especially in service activities. Pressure for wage growth easily spills over into price growth.

Psychological effect and expectations

After years of high inflation, consumers and businesses expect price growth to continue. This creates a vicious circle: retailers and service providers raise prices in advance, and consumers rush to buy, which further fuels inflation.

Can Croatia stop rising prices?

The government has on several occasions tried to limit the prices of basic products and energy sources, but a long-term solution requires strengthening competition, greater productivity, and reducing dependence on imports. It is also necessary to invest in the digitalization and modernization of the service sector in order to increase efficiency and reduce costs.

And while the rest of Europe enjoys price stabilization and a return to pre-pandemic inflation levels, Croatia is facing challenges that are partly structural and partly the result of specific economic dynamics. Without serious reforms and stronger competition, Croatian citizens will continue to feel pressure on their wallets, despite favorable European trends.