Macroeconomic Forecast Croatia

Consumer price inflation accelerated slightly to 2.0% year-on-year (y-o-y) in August, compared with 1.9% in July. It is Croatia's lowest rate of inflation since January. We have revised down our forecasts for consumer price inflation in Croatia to average 2.1% this year and 2.4% in 2012, down from 2.2% and 2.9% previously. While our Commodities team does not expect to see the same ramping up in prices as witnessed in H111, global commodity prices are forecast to remain elevated, putting additional upside pressure on the consumer price index. We expect the weak recovery in domestic demand to prohibit stronger inflationary pressures from manifesting over the medium term.

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