The Prime Minister's advisor for economic issues, Zvonimir Savic, said on Friday that the government's measures lessen the inflation pressure and Croatia's plan to join the euro area on 1 January 2023 will be achieved and the criteria will be met, including the criteria of price stability.

Savic addressed a business breakfast organised by the American Chamber of Commerce in Croatia (AmCham) called “Croatia’s Accession to the Eurozone”.

Price stability which is reflected in the inflation rate is one of the Maastricht criteria and Savic recalled that prior to the coronavirus crisis – 2017, 2018 and 2019, Croatia had fulfilled all five Maastricht criteria relating to the stability of the exchange rate, stability of interest rates, budget deficit and government debt.

Savic said that all the obligations that Croatia is required to implement prior to entering the euro area are going according to plan, which includes adapting legislation, adding that the said macroeconomic criteria would be fulfilled.

He underscored that inflation is now “one of the most sensitive criteria,” however Croatia is in a relatively good shape because its inflation rate is a little below the EU average and very close to the inflation rate of countries in the euro area. According to the latest Eurostat data, in January, inflation in Croatia was 5.5% on the year according to the harmonised consumer price index, whereas in the EU it was 5.6% and 5.1% in the euro area.

Savic recalled that the European Commission had recently assessed inflation trends in Croatia which were below the EU average in 2021, 2022 and will be in 2023.

He highlighted that the government’s package of measures to buffer the energy price hike, worth a total value of HRK 5 billion that was adopted on Wednesday and enters into force on 1 April will “significantly buffer the inflation pressure.”

“The measures we are implementing contribute to relieving the inflation pressure and we will achieve the objective of inflation to be at the euro area and EU average so that criteria can be satisfied,” said Savic.

He added that the government’s set of measures is one of the most comprehensive in the entire EU and that at the moment it is sufficient to “significantly buffer price increases.”

A formal decision on whether Croatia will join the euro area or not on 1 January will be adopted at the end of June or early July.

No real danger of food shortages

Asked about further repercusssions of the war in Ukraine for Croatia’s economy, Savic said that the situation is being analysed by the day and the food sector could be affected however, he underscored the significant activities by the Ministry of Agriculture.

Savic added that he does not believe there is any real danger of food shortages, recalling that that did not occur even during the coronavirus crisis.

“The situation will eventually calm down and as far as Croatia is concerned it is important to overcome the challenges and to enter the second half of the year more stable and to achieve the objective of joining the euro area on 1 January 2023,” he said and added that as far as the government’s activities are concerned, that date will not be postponed.

AmCham: We expect successful implementation of euro currency as of 1 January

AmCham’s executive director Andrea Doko-Jelusic informed that the chamber had formed a task force at the beginning of the year regarding Croatia’s aspirations to enter the euro area. Several companies have joined the task force which indicates the interest of the business community for that process to be achieved successfully.

She highlighted that the country is facing very challenging times with security issues being topical as well as the issue of inflation.

“However, the high exposure of Croatia’s economy to the euro and the great interest by companies for that process to be completed successfully, indeed contributes to the fact that we truly expect the successful implementation of the euro on 1 January 2023,” said Doko-Jelusic.