Expert: Croatia's anti-inflation measures are a good start, but tourism price hikes unlikely to cause major turbulence

Economic expert Mladen Vedriš stated that while the Croatian government's new package of measures to curb inflation is a positive step, its sufficiency remains questionable. He emphasized the need for robust mechanisms, similar to those in other European countries, to regulate prices and markets, citing Austria's actions against companies for dumping prices.

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It's good that it's finally happening, but it mustn't remain a declaration. Abroad, there are entire mechanisms, from consumer associations pointing out problems to departments within individual ministries. Austria, for example, has sued several large companies for dumping prices.

Vedriš dismissed the notion that inflation is solely attributable to Prime Minister Plenković, calling it a political oversimplification. He explained that inflation typically goes unnoticed during good economic times, but the current sharp rise in Croatia, after a long period of stability, presents a significant challenge. He stressed that while the government is ultimately responsible for managing inflation, attributing it to a single entity is inaccurate.

Addressing the anticipated increase in flat-rate taxes for tourism, Vedriš believes it will not significantly disrupt the market. He argued that only businesses with prime locations, high quality, and a specific guest profile will be able to pass on the increased costs. Others, he warned, will face a choice between reduced profits or losing business altogether, potentially leading to a market restructuring. The return of major players like Greece, Turkey, and Spain to the tourism market after the pandemic has ended the era of easy price increases.

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Those who have such a position, quality of location, and such a structure of guests will be able to incorporate that price increase. Those who do it instead of reducing their profit and losing a guest will have neither profit nor cost coverage. Therefore, I don't think the increase in flat rates will cause major market turbulence.

Vedriš also touched upon the cost pressures faced by tourism providers, including energy and cleaning expenses. He acknowledged that some might find renting less profitable and cease operations, while others might shift to long-term rentals. He noted that these adjustments could lead to a restructuring of the market. He also mentioned that government ministries must implement savings measures, as Croatia is nearing the 3% GDP deficit limit, which could trigger EU monitoring.

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With the normalization of air transport after the pandemic, serious players have returned to the game – Greece, Turkey, Spain, and the convenience of raising prices has ended.