For more than a month, consumers in Croatia have been expressing their dissatisfaction with the prices of goods and services with a boycott of stores and protests in various forms, organized by the consumer platform "Hello, Inspector" through the social network Facebook. The actions are supported by consumer protection associations, unions, political parties and even the Minister of Economy and Finance. The boycott subsequently spread to other Balkan countries, including Bulgaria, BTA reports.
The enthusiasm from the first refusal to shop, organized on January 24, has cooled with each subsequent one, according to tax office data on issued receipts and reported turnover.
A boycott has also been organized for this Friday, February 28, which will take place under the slogan: "Do not give your money regardless of pressure, challenges, price discounts and promotions", the organizers' Facebook page states.
A lecturer at the Faculty of Economics of the University of Zagreb, Dr. Mariana Ivanov, commented to BTA that although the euphoria from the first boycott has subsided, the protest refusal to shop is having an effect.
"There was an effect because people realized that reducing consumption and avoiding unnecessary shopping, especially shopping of products that have significantly increased in price is the only tool to prevent further price increases or to force traders, manufacturers and everyone else to offer as many products as possible on promotion," said Ivanov.
According to her, interest in the boycott has waned, as week-long campaigns are being organized against shopping in certain chains or for certain products such as carbonated drinks, bottled water, detergents, while in fact consumers are not satisfied with the prices of basic products that are purchased daily.
After the first boycott, the government expanded the list of products with limited prices from 30 to 70, including bread, which somewhat reduced dissatisfaction. Retailers are obliged to offer at least one product from a price-limited category and to clearly label this product.
Value added tax (VAT) in Croatia is 25 percent, but in 2022 The government reduced the VAT rate to 5 percent for a wide range of products such as bread, fresh meat, fish, eggs, fruits and vegetables and 13 percent for some sanitary products.
Among the results reported by "Hello, Inspector" is the law adopted by parliament last week, which obliges merchants to publish online the prices of their goods, not only those of promotions, thereby giving access to applications to use the data for comparing prices. The goal is greater transparency and increased competition. As a consequence of the boycott, larger discounts in retail chains are also highlighted. However, the goal is a permanent decrease in prices, "Hello, Inspector" notes. Last week, there were also protests in front of banks in the country, including the central one, after which several banks refused to raise their fees.
In the fight for lower prices, "Hello, Inspector" launched its own app this week, allowing consumers to check product prices in various retail chains and receive information about upcoming boycotts.
However, the Croatian Employers' Association (HUP) believes that without systemic changes aimed at deregulating the economy, reducing the tax burden and easing investment conditions in order to strengthen competition among retailers, the effect of the store boycott can only be short-term and insignificant, the Croatian news agency HINA reports, citing the association's analysis bulletin "Focus Tiedna".
According to the association, boycotts may have a temporary impact on sales, but small retailers would suffer the most, and overall competition in retail would be harmed, which is contrary to the interests of consumers.
The reasons for the growth of prices
In January, inflation in Croatia, measured according to Eurostat's harmonised methodology, was 5 percent on an annual basis, ranking the country third in the EU in terms of price growth after Hungary (5.7 percent) and Romania (5.3 percent), and first in the euro area. Inflation in the EU was 2.8 percent and in the euro area 2.5 percent.
"The reasons for the rise in food prices are multifaceted and are not based on policies or the business models of retail chains. "Along with rising supplier costs, food sales prices are influenced by many other factors, such as the exceptionally strong growth in workers' incomes in Croatia (+14.7 percent nominally or 11.8 percent in real terms in 2024), the fourth highest effective VAT rate in the EU (20.3 percent compared to 16.6 percent on average for the EU and only 14.0 percent in Italy), as well as the generally high tax burden on labor and profits, complex and expensive business procedures, the seasonal shock due to tourism, growth in energy prices above the EU average, increased input costs, especially for labor (+28 percent in two years) and energy (+75 percent in trade in two years), as well as increased net imports," the Croatian Employers' Association states, commenting on the first citizens' boycott in January in its newsletter "Focus Tiedna", quoted from the publication "Večerni list".
The Croatian National Bank pointed out in a commentary on the rise in prices of goods and services in the period 2021-2024, published on the institution's website, that the rapid growth in consumer prices in Croatia in the previous months compared to the average inflation in the euro area is mainly due to the strong domestic demand for goods and services against the backdrop of extremely high nominal and real wage growth, especially in the public sector, but also in the private sector.
This is one of the reasons for inflation in Croatia, according to Mariana Ivanov. According to her, the increase in wages in the public sector last year "in conditions of labor shortage and significant investments in infrastructure, digitalization, renewable energy, abundantly financed by European funds," has put pressure on wages in the private sector as well, thus labor costs have increased significantly and this has been reflected in the prices of goods and services.
At the same time, the increase in wages has enabled citizens to consume more and borrow more, which has further created pressure on the price increase of goods and services, says the lecturer from the Faculty of Economics in Zagreb.
According to data from the website "My Salary" (MojaPlaća), cited by the information website "Index", the average monthly net salary in Croatia last year was 1,346 euros, which is 12 percent more than the previous year. Since January, the minimum gross salary has been increased by 130 euros to 970 euros.
Among the reasons for the increase in the price of goods and services, Ivanov also points to the high VAT of 25 percent for most goods and services, as well as speculation in recent months about the future price of gas.
According to Ivanov, the increase in prices was also contributed by the fact that many traders raised prices six or more months before the introduction of the euro on January 1, 2023, as they knew that there would be restrictions during the period of introduction of the single currency. According to her, Croatians are already used to the euro being their currency, but people still cannot feel the value of the good or service in euros.
"Two euros seems little to them, and 20 euros - pocket money," points out Mariana Ivanov as an example.
Croatia switched to the euro at a rate of 7.53450 kunas for 1 euro.
Thus, both traders and producers were given the opportunity to increase prices too much, because even today (two years after the introduction of the euro) people have no sense of the value of goods and services expressed in euros, she explains.
At the same time, Ivanov notes that the difference in income and wealth among Croatians has grown significantly.
"Some people literally buy regardless of price (they are actually the ones who support consumption growth the most), while a very large part of people do not have enough income to buy basic products and are most affected by inflation," Ivanov believes.
According to her, prices in Croatia are not rising at the moment, after the government agreed with traders and manufacturers to give up part of the profit, and at the same time, people have understood that by limiting their purchases, they can put pressure on those offering goods and services not to raise prices or even to lower them.
The Croatian Employers' Association believes that price growth will slow down when consumption falls on market grounds. Even if the boycott puts short-term pressure on retail prices, it is very likely that the reasons behind the increase in the price of goods and services will again become dominant, the organization warns.