The rounding of food and drink prices in Croatia would contribute, under a pessimistic scenario, to an increase in total inflation of about 0.5 percentage points, but due to competition on the market it is unlikely that all retailers would round up prices, so a much smaller price rise can be expected, according to HNBlog.

The consumers’ biggest fear related to the introduction of the euro concerns the possibility that prices might increase, with the rounding up of prices highlighted as one of the possible reasons, according to an HNBlog article “Possible effects of rounding up the prices of food products during the introduction of the euro on inflation”, written by Croatian National Bank (HNB) employees Ivan Muzic and Andreja Pufnik.

When recalculating the current attractive prices into euros, the prevailing intention so far was to keep the prices at attractive levels. If the retailers were to increase all prices of food products to the next attractive level after the recalculation, that would increase the prices of food by 2.2%, the prices of non-alcoholic beverages by 2.6%, and the prices of alcoholic beverages by 1.8%, the authors said.

Under such a pessimistic scenario, rounding up the prices of food and drinks would contribute to an increase in total inflation of about 0.5 percentage points, they said.

However, due to competition on the market, it is unlikely that all retailers would round the prices up, so a significantly smaller price rise caused by rounding can be expected, which is also what the experiences of countries that have already adopted the euro indicate.

In addition, the currently elevated inflation could reduce the need for additional increases of prices to new attractive levels because this could likely be achieved as part of the regular price adjustments, said Muzic and Pufnik.