Retailers won't increase their margins and the price of food will go down, the Vecernji List daily reported on Friday, citing the Lidl supermarket chain which has announced lower prices as of March already, one month before the government's decision to cut VAT rates on certain food products goes into force.

Prices for all categories for which the government has decided to lower VAT will certainly fall. Retailers will not increase their margin because nobody can afford to be more expensive than their competition, and when margins remain stable, prices will decrease by the difference in VAT, the president of the board of the NTL supermarket retail chain, Martin Evacic, said.

The government’s measures announced earlier this week foresee VAT to fall as of 1 April, from 13% to 5%, on fresh meat and fish, eggs, fruit, vegetables, edible oil, lard and children’s food, and also in agriculture (seedlings, fertilizer, pesticides), while VAT on butter and margarine will decrease from 25% to 5%.

Evacic, who is the president of the Retailers’ Association at the Croatian Employers’ Association (HUP), underscored that the concentration of retailers on the Croatian market is too high and that consumers watch how they spend every kuna. The lower VAT will mean a decrease in budget revenue, however, with the lower prices demand could be greater, which could offset the effect of the lower revenue and ensure the same profit for retailers.

Some retailers have announced the price of flour and bread could go up again in March by an average of 10% so we are yet to see if some of the government’s measures will prevent that increase, Evacic says.

The Konzum supermarket retail chain has announced that it will reduce the prices of more than a thousand items as of Monday, 21 February, including fruit and vegetables, meat and fish, eggs, edible oil and lard, butter and margarine, children’s food, and hygienic pads and tampons.