The Croatian Central Bank (HNB) does not expect a particularly high inflation rate this year, and this year's inflation is to a large extent the result of last year's deflation and the current rise in energy prices, HNB Governor Boris Vujcic said on Wednesday.

This year inflation might reach 2.4 percent and then slow down to roughly 2.2 percent in 2022, Vujcic told a conference of economists in the northern Adriatic resort town of Opatija.

Citing estimates by large central banks, he said that the factors that fuel inflation are temporary and that prices, once supply chains have been restored globally, will continue to fall. There are already signs that prices of metals and unprocessed foods have started to fall slightly, and oil prices are also expected to decline, he added.

Vujcic also mentioned labour shortages and growing wages, saying that this was yet another risk of slightly higher inflation. “These would not be alarming levels of inflation, if this year we have an inflation rate of 2.4 percent, which is close to the rate targeted by central banks.”

He noted that people perceive inflation as being higher than it actually is, and that perceived inflation is usually higher than actual inflation. He added that half the rise in consumer prices was fuelled by the rise in energy prices.

Vujcic also spoke of the rise in property prices, which are growing faster than the consumer price index. He said that negative interest rates are encouraging people to convert their savings into real estate, adding that subsidies also often stimulate property price growth. He said that it is questionable what can be done about this until interest rates have changed.