Source: N1
The Chief Economist of the Croatian National Bank, Vedran Šošić, commented on the latest macroeconomic projections of the Croatian National Bank, the rise in inflation and the slowdown in economic growth due to the conflict in the Middle East, on the show “Novi dan” with Hrvoje Krešić.
According to the CNB’s projections, published on Friday, in the event of a prolonged conflict with Iran and additional supply difficulties, energy prices could rise even further and remain at elevated levels for longer, which could result in lower growth and higher inflation than expected.
Šošić reiterated that the CNB expects inflation to accelerate to 4.6 percent and that in the event of major shocks on the energy market, it could increase to seven percent in the worst-case scenario.
“This would happen if oil prices reached $150 per barrel and gas prices reached more than €100 per megawatt-hour,” Šošić points out, adding that he does not expect us to encounter this scenario.
Moreover, the CNB’s chief economist expects that energy prices will fall and inflation will slow down at the beginning of next year.
Tourism growth of only three percent
Regarding expectations of growth in Croatian tourism due to cancellations of arrangements in competing destinations such as Turkey or Greece, Šošić warns that inflation is rising worldwide and that it is possible that our tourism will not grow significantly because many will give up traveling.
“Inflation will not only increase in our country, perhaps some people will decide that these are not good times to spend and decide to save and not travel. Our projections include a very modest growth in tourism of only three percent because we expect demand for our tourism offer to decrease,” emphasized Šošić, adding that the CNB does not see tourism as a major source of inflation this year, unlike last year.
Cool heads of European governors
He believes that households and the economy are quite resilient and prepared for inflationary shocks, as is the state, which has reduced public debt to 57 percent. He pointed out that European governors are closely monitoring what is happening and will be ready to react if necessary.
“Monetary policy cannot produce oil or gas, but it ensures that the first blow does not spill over into secondary effects, that inflationary expectations are not raised and all prices increase. European governors are keeping a cool head, but they are closely monitoring what is happening,” said Šošić.
