In the past four years, the Statistics Office recorded an average deflation of around 1% in July. This year, the higher VAT lowered it to 0.3%.

The monthly deflation was driven by the summer sales of clothes and footwear, which contributed 1.2 pp to the monthly deflation. Footwear went down by 16.9%, while the prices of clothes were 16.6% lower.

Moreover, a drop in the prices of fruit (-4.3%) and vegetables (-4.1%) accounted for 0.1 pp of the monthly deflation.

Apart from the VAT rise, the negative growth was further lowered by the increase in prices of package holidays, which increased by 11.8% in July over June, contributing 0.4 pp to the monthly inflation.

Commenting on the latest figures, the Institute of Macroeconomic Development (IMAD) said the monthly changes were expected, reflecting the traditional seasonal factors and the increase in VAT.

IMAD however added the VAT hike was not yet completely reflected in the prices. "It may not be excluded that prices will continue to increase by the end of the year in the groups where the increase is yet to reflect in the prices," the government think tank said.

Meanwhile, the hike in annual consumer price growth was fuelled above all by the increase in prices of food and non-alcoholic beverages, which contributed 0.7 pp to the overall inflation rate.

The highest increase in prices of food and non-alcoholic beverages was recorded for vegetables and fruits (+20%) and meat (+4.4%).

Moreover, the increases in prices of hospitality services and electricity also contributed to the annual consumer price growth; 0.5 pp each.

Alcoholic beverages and tobacco contributed 0.4 pp to the annual inflation rate. The prices of the former went up by 9.8% and the latter increased by 3.6%.

Measured with the harmonised index of consumer products, the official EU gauge, prices in Slovenia rose by 2.8% year-on-year compared to 2.6% in July 2012.