Issue 1 – January 2025
The purpose of this review is to analyze the current situation on the Ukrainian currency market and forecast the hryvnia exchange rate against major currencies based on the latest data. We look at the current conditions, key influencing factors, and likely scenarios.
Analysis of the current situation
At the beginning of 2025, the Ukrainian currency market is showing relative stability after the seasonal fluctuations that characterized the end of the previous year. The National Bank of Ukraine (NBU) continues to actively support the market with verbal and resource interventions, without exposing its reserves to significant risks. This helps to avoid sharp exchange rate fluctuations and maintains the confidence of economic entities in the predictability of the national currency.
At the same time, high inflation and devaluation expectations among households and businesses may stimulate increased demand for foreign currency. This may become an additional and more significant factor of pressure on the hryvnia. According to UNB surveys, businesses expect moderate inflation and exchange rate growth, which affects investment and development decisions, as well as planning prices for goods and services, which may exceed the current exchange rate during the year and have a negative inflationary impact, spinning up the devaluation flywheel of negative expectations.
Dollar exchange rate forecasts
Short-term outlook
In the short term, the hryvnia exchange rate is expected to remain in the range of 42-43 UAH/$, given the stabilization of the currency after the seasonal increase in demand for it at the end of last year. Low economic and business activity in January will help keep the exchange rate stable in the short term. This is evidenced by the spread between the buying and selling rates of the US dollar: it remains relatively stable, indicating that supply and demand in the Ukrainian foreign exchange market are balanced.
Medium-term outlook
In the first half of 2025, the hryvnia exchange rate is likely to gradually approach 44 UAH/$, which is fully in line with the government’s budget forecast for 2025. Avoidance of extreme exchange rate fluctuations in the first half of the year will allow the NBU and the government’s economic bloc to maintain foreign exchange reserves to keep the hryvnia within the expected parameters of an average annual exchange rate of 45 UAH/$. Controlled devaluation may become one of the tools to fill the budget at the expense of tariffs and other fees fixed in foreign currency, including some excise taxes.
Euro exchange rate forecast
Short-term forecast
The euro continues to depreciate against the hryvnia, reaching the levels of UAH 43.25-44.15/€. Despite the downward trend in the euro, the spread between the buy and sell rates remains relatively stable, which also indicates that the market is balanced. In the short term, the euro is expected to remain within this range with further movement to UAH 43-44/€, taking into account current trends in international markets and domestic economic factors.
Medium-term forecast
In the coming months, the euro may experience significant fluctuations, which may be due to possible “exchange rate wars” between the US and the EU, as indicated by representatives of the future administration of US President-elect Donald Trump. They claim that a change in the dollar’s parity with the euro is one of the sources of strengthening the American economy.
These verbal interventions, if transformed into real actions, may cause turbulence in the international currency market, which will naturally affect the exchange rates of major world currencies in Ukraine.
Key factors affecting the foreign exchange market
Foreign economic factors. Possible “currency wars” between the US and the EU, as reported by international economic media, may affect global currency markets and, accordingly, the hryvnia exchange rate against major currencies.
2. Inflation and devaluation expectations. High expectations of households and businesses stimulate demand for foreign currency, putting additional pressure on the hryvnia. According to UNB surveys, businesses expect moderate inflation and exchange rate growth.
3. Monetary policy of the NBU. The NBU will continue its policy of controlled flexibility of the exchange rate and will intervene to contain sharp fluctuations.
4. Tax changes. Increase in tax rates on deposit income may stimulate demand for cash, which will put additional pressure on the hryvnia exchange rate.
5. Business climate. Reports of massive business closures due to an increase in the tax burden should not be viewed as a clear symptom of a decline in business activity, as this may only be a sign of business shadowing, which could become an additional driver of demand for foreign currency.
Recommendations for companies and investors
Short-term strategies: focus on maintaining liquidity. Use foreign currency deposits or short-term bonds to preserve capital. The period of increased volatility is an ideal time for experienced investors, while inexperienced investors should avoid risky investments.
Medium-term strategies: build a balanced currency portfolio with a predominance of the US dollar, given its stability in the international economy. If you have economic ties with the eurozone countries, their currencies are becoming increasingly attractive for gradual replenishment of savings. The currencies of EU member states can be a temporary refuge for savings in times of turbulence on international markets. Risk-averse investors should focus on fixed income instruments.
Long-term strategies: Protect your savings from devaluation risks by keeping most of your capital in hard currency or by looking for stable sources of income over the long term. Consider diversifying into safe havens and alternative assets such as gold or cryptocurrencies.
Risk management: This factor comes to the fore. Constantly monitor tax and regulatory changes, which are becoming a key risk factor in the field of legal financial transactions and banking. Avoid excessive accumulation of short- and medium-term assets in hryvnia. Consider geographical diversification of assets and operations in more regulatory stable jurisdictions.
This material was prepared by the company’s analysts and reflects their professional and analytical judgment. The information provided in this review is for informational purposes only and should not be considered a recommendation for action.
The company and its analysts make no representations and assume no responsibility for any consequences that may arise from the use of this information. All information is provided “as is” without any other warranty of completeness, timeliness or obligation to update or supplement it.
Users of this material should make their own risk assessments and make informed decisions based on their own assessment and analysis of the situation from various available sources that they believe to be sufficiently qualified. We recommend that you consult an independent financial advisor before making any investment decision.
REFERENCE
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More than 90 branches in 16 largest cities of Ukraine are located in convenient locations and equipped with modern equipment, which ensures the convenience, security and confidentiality of each transaction.
The company’s activities comply with the regulatory requirements of the NBU. KYT Group adheres to EU standards, has a branch in Poland and plans cross-border expansion to European countries.
In 2024, Poninkivska Cardboard and Paper Mill-Ukraine (PCPF-Ukraine, Khmelnytsky region) increased its corrugated packaging output by 19.1% compared to 2023, to 98.8 million square meters.
As reported, the plant practically maintained the same production growth rate throughout the year, with an 18.7% increase in January-November.
According to Ukrpapir Association statistics provided toInterfax-Ukraine, the mill continues to be one of the top three producers of this product after Kyiv Cardboard and Paper Mill and Trypillia Packaging Mill.
Over the past year, the company also increased its production of containerboard (including corrugated paper) by 2.6% to 80.4 thousand tons, and paper by 24% to 0.95 thousand tons.
At the same time, in December, it reduced the production of corrugated boxes by 14% by December 2023, but increased by 10.6% by November 2024, to 12.8 million square meters. Paper and cardboard production decreased by 6% and 4.7%, respectively, to 7.3 thousand tons.
In monetary terms, PCPF-Ukraine produced products worth UAH 2 billion 732.4 million (+15.3%) over the year.
As reported with reference to the data collected by the association from the main enterprises of the industry, in 2024, the production of cardboard boxes in Ukraine increased by 12.3% compared to 2023 – up to 590.1 million square meters, paper and cardboard by 3.1% – up to 601 thousand tons (in particular, cardboard production decreased by 0.7% to 463.5 thousand tons, paper production increased by 18.2% to 137.5 thousand tons).
Poninkivska Paper Mill (formerly Poninkiv Cardboard and Paper Mill), once the largest producer of school notebooks, now has one main production facility – paper and cardboard, producing mainly corrugated cardboard and corrugated packaging, as well as wrapping and waste paper.
The plant is part of the United Cardboard Company-Ukraine (UCK, Lutsk) owned by businessman Mykola Lobov, whose production assets include, among others, Lutsk KPF-Ukraine (Volyn region), which last year (according to Ukrpapir) produced 63.7 thousand tons of various cardboard (down 3.4%) and 48.8 million square meters of corrugated boxes, compared to 17.4 million square meters a year earlier.
As reported, in 2023, PCPF-Ukraine produced products worth almost UAH 2 billion 450 million, up 3% year-on-year. Net profit increased 2.7 times to UAH 27 million.
Despite the temporary occupation of part of the agricultural land by the enemy, Ukraine demonstrated good results in the agricultural sector in 2024 and was able to return the historical ways of agricultural exports, and therefore offers the Portuguese Republic to strengthen cooperation, said Vitalii Koval, Minister of Agrarian Policy and Food, at an online meeting with José Manuel Fernandes, Minister of Agriculture and Fisheries of Portugal.
“In 2024, 57% of Ukraine’s agricultural exports went to the EU countries. In total, Ukraine exported agricultural products worth $24.6 billion, including $211.6 million to Portugal,” the Ministry of Agrarian Policy’s press service quoted the minister as saying.
In addition, he emphasized that last year Ukraine returned to its historical ways of agricultural exports, as 86% of agricultural products are exported through Odesa and Danube ports. According to him, Ukraine is actively working to open new markets, particularly in Africa and the Middle East.
Koval urged his Portuguese counterpart to work together to combat the illegal sale of Ukrainian grain to Russia.
The Minister also thanked the people of Portugal for their consistent support of Ukraine and the President’s humanitarian initiative Grain From Ukraine.
According to the project’s weekly monitoring, since the beginning of this week alone, carrots on the Ukrainian market have fallen in price by an average of 10%. Today, producers offer these root crops for sale at 23-30 UAH/kg ($0.54-0.71/kg), depending on the quality and volume of the batch. It should be noted that producers are forced to make such price adjustments even in the face of limited supply of quality carrots on the market.
According to the producers, the pressure on prices is exerted by a very restrained demand for medium and low quality vegetables. Wholesale companies and retail chains are willing to buy these root vegetables only in small batches, explaining their decision by the extremely low retail sales.
This season, producers attribute the problems with the quality of vegetables to unfavorable weather conditions during the growing season and harvesting. Starting in the second summer month of 2024, Ukraine experienced dry, hot weather that prevented the plantations from developing normally. Last fall, due to heavy rainfall during the harvest, farmers were forced to store products with high humidity.
However, despite the reduction in the price of carrots, today these root crops are offered for sale in Ukraine on average 2.2 times more expensive than in mid-January last year.
You can get more detailed information on the development of the carrot market and other fruit and vegetable products in Ukraine by subscribing to the operational analytical weekly – EastFruit Ukraine Weekly Pro. Detailed product information is available here.
Source: https://east-fruit.com/novosti/v-ukraine-nachala-deshevet-morkov/
Kokhavyno Paper Mill (KPM, Lviv region), which produces sanitary paper products, increased its production by 85.2% in 2024 compared to 2023, to UAH 2 billion 132 million, according to statistics from Ukrpapir Association.
As reported, the factory started last year with a 9% increase in production by January 2023, but increased its growth every month, and in January-November it amounted to 82% compared to the same period in 2023.
According to the association’s statistics provided toInterfax-Ukraine, in physical terms, the production of the base paper for sanitary products at the factory increased by 42.2% to 59.3 thousand tons last year.
The output of toilet paper in rolls amounted to 137.3 million units, slightly decreasing by 2023. KPF confidently ranks second in terms of its output after Kyiv CPP.
As reported, in October last year, Kokhava Pulp and Paper Mill put into operation a paper machine for the production of cellulose base paper (previously, it produced only waste paper-based products). To organize such production in 2021, the mill attracted a EUR 13.8 million loan from the EBRD.
Kokhava Pulp and Paper Mill, which has been operating since 1939, produces base paper for sanitary and hygiene products, as well as toilet paper and paper towels. Before the new machine was put into operation, the mill had two paper machines with a total capacity of 40 thousand tons of base paper per year.
In 2023, the plant increased its production by 18% compared to 2022 to UAH 1 billion 151.2 million, while net profit increased 2.7 times to UAH 137 million.
Hungarian Foreign Minister Peter Szijjarto and Serbian Energy Minister Dubravka Jedovic-Handanovic agreed on Wednesday to intensify investment policy in the energy security sector and speed up the construction of the first oil pipeline between the two countries, the Hungarian foreign minister said.
“We have agreed to expand joint investments in energy and energy security, including the construction of the first interconnecting oil pipeline,” Szijjarto wrote on Facebook (Meta Platforms Inc.).
In addition, Sijarto and Jedovic-Handanovic agreed to step up funding for “a new power line connecting the networks of the two countries.”
“For our country, Serbia is a strategic partner, without Serbia there will be no energy security for Hungary, and vice versa,” the Hungarian Foreign Minister added.
As reported, the construction of the oil pipeline between Hungary and Serbia is expected to be completed by 2026. The new branch will be connected to the Druzhba pipeline and will allow Serbia to diversify its oil supplies and not depend on Croatia.
