inflation in Croatia
The European Commission indicated on Wednesday that Croatia was prepared to join the euro area, with entry planned for January 1, 2023, after meeting the criteria for price stability, fiscal soundness, and overall economic alignment required for euro adoption.
According to officials, Croatia’s move to adopt the euro is expected to reinforce its economy and deliver long-term benefits for residents, businesses, and society at large. The Commission President noted that Croatia choosing the euro would also strengthen the currency union itself.
The Community Manager outlined that Croatia satisfies several essential criteria for euro adoption, including a stable price environment. Key benchmarks cited include an average inflation rate near 4.9 percent over the past year, a prudent budget stance, controlled exchange and interest rate dynamics around the euro area norms, and anchored financial stability.
In evaluating the sustainability of euro adoption, the process also considers balance of payments, the integration of financial and labor markets, wage dynamics, and price indicators beyond inflation alone.
Valdis Dombrovskis, the EC vice president for economy, praised Croatia for its commitment and steady effort to meet the euro entry conditions by January 2023. He highlighted perseverance through the process and the clear alignment with EU convergence goals.
The Commission also identified main risks, including the challenge of integrating Croatia into the euro area business ecosystem and potential concerns about corruption and regulatory quality. Despite these concerns, the Commission indicated that the economy is unlikely to experience significant imbalances as euro adoption progresses.
These assessments appear in the Convergence report, which reviews progress by candidate member states pursuing euro area entry. The report also mentions ongoing discussions with Sweden, Bulgaria, the Czech Republic, Hungary, Poland, and Romania, alongside Croatia, as these countries advance toward adopting the single currency.
Final decisions rest with the Council, which will determine when Croatia joins the euro in the first half of July following input from the Eurogroup and the European Council, and after the European Parliament and the European Central Bank have weighed in with their views.
Croatia stands out as the only one among the seven candidate countries that fully meets the criteria for financial stability and for aligning its monetary framework with the European Central Bank regulations. The Commission noted that inflation in Croatia is expected to align with euro area levels during 2022 and 2023, though policymakers warned that successful euro integration will require careful monitoring of price dynamics, especially if wage growth accelerates in step with productivity gains.
According to the Brussels assessment, Croatia’s deficit narrowed to 2.9 percent of GDP in 2021 and is projected to improve further to about 2.3 percent in 2022 and 1.8 percent in 2023. While the public debt remains relatively high, it is anticipated to trend downward, nearing 80 percent of GDP in 2021 and continuing to ease over the medium term, though some debt sustainability risks persist.