site.btaFiscal Council of Bulgaria Analysis: Euro's Adoption in Croatia Had Insignificant Influence on Inflation

The transition to the euro in Croatia raised some concerns, but the data available indicates that the inflationary effect was weak and transitory. Global economic conditions, rather than currency changes, remained the main factor for price fluctuations, an analysis of the Fiscal Council of Bulgaria on the effects of inflation in Eastern European countries after joining the euro area, published on Wednesday, shows.

The analysis examined the impact on inflation after the adoption of the euro in Estonia, Latvia, Lithuania and Slovakia. The Fiscal Council concluded that the effects on consumer prices after the adoption of the euro in these four countries were temporary, especially when the process was accompanied by effective measures on price transparency and supervision of the market.

Effects on inflation in Croatia after the adoption of the euro

On 1 January 2023, Croatia officially adopted the euro as its currency, becoming the twentieth member state of the euro area. The decision raised concerns among the public and experts about the potential inflationary consequences of the currency change. The analysis of the Fiscal Council examined the inflation dynamics in Croatia in the period 2022 - April 2025. Based on the data analysed, the impact of the adoption of the euro on consumer prices was estimated to be minimal. A Eurostat estimate for the period January - March 2023 showed that the contribution of the euro to inflation was between 0.04 and 0.20 percentage points per month, a minimal and temporary increase.

However, public perception did not reflect these statistics. Many consumers said that they noticed an increase in the prices of everyday goods and services. The reason for the discrepancy between data and perception was partly due to the lack of sufficient communication by public institutions about the real economic factors. In fact, inflation trends in Croatia after the adoption of the euro were mainly driven by external economic events, rather than by the introduction of the single currency itself.

In addition, public authorities undertook a number of price control steps that proved to be contradictory and relatively ineffective. The activities of the Croatian authorities could serve as a lesson to the Bulgarian government as possible initial steps that should not be taken.

Effects on inflation in Estonia, Latvia, Lithuania and Slovakia after the adoption of the euro

Similar processes were observed in other Eastern European countries that switched to the euro after joining the European Union. Estonia (2011), Latvia (2014), Lithuania (2015) and Slovakia (2009) also experienced a short-term and moderate increase in inflation in the first months after the currency changeover. Eurostat and European Central Bank data showed an increase in inflation of about 0.2 to 0.3 percentage points. However, the inflation rate quickly stabilized within the first few months after the adoption of the euro.

In the long run, inflation in these states does not differ significantly from the average for the euro area. Lithuania and Estonia experienced higher inflation rates in 2021-2023, but this was due to the energy crisis and their structural dependence on imports. Slovakia, on the other hand, maintained relative price stability thanks to its resilient macroeconomic policies.

The experience of these four countries generally shows that the effects of joining the euro area on inflation are temporary, especially when the process is accompanied by effective price transparency and market surveillance measures, the analysis said.