The National Bank of Ukraine (NBU) has revised its inflation forecast from 7% to 8% in 2021, expecting inflation to return to the 5% target in H1 2022.
“Considering the fast-paced recovery of the global economy and higherinflationary pressures, the NBU revised its inflation forecast from 7% to 8% in 2021, expecting inflation to return to the 5% target in H1 2022 and settle at this level further on,” the NBU said on its website on Thursday.
The central bank said that inflation will peak in Q3 2021. Inflation will start to decelerate in autumn, return to the 5% ± 1 pp target range in H1 2022, and subsequently remain there.
The steep rise in inflation was largely driven by temporary factors, such as growing global prices for food and energy. A revival in the global economy and the effects of smaller harvests continued to push up prices. A low comparison base also played an important role.
Underlyinginflationary pressures increased due to sustained growth in consumer demand, which was, among other things, fueled by higher wages, the NBU said.
Retail turnovers consistently exceeded pre-crisis levels, being 5.6% year-over-year larger in February, the central bank said.
The growth of consumer prices in Ukraine in March 2021 accelerated year-over-year to 8.5% from 7.5% in February, from 6.1% in January and from 5% in December 2020.
According to the State Statistics Service on Friday, in March inflation increased to 1.7%, while in February it was 1%, in January 1.3%.
In addition, the State Statistics Service in March 2021 recorded underlying inflation of 1.6% compared to the previous month and 2.4% from the beginning of the year.
The Ukrainian government expects inflation of 7.3% in 2021, while the National Bank of Ukraine (NBU) 7%. At the same time, the NBU said that inflation in the first quarter was higher than its expectations. According to the NBU, a turning point ininflationary dynamics may occur in August or September 2021.
The Cabinet of Ministers expects the hryvnia exchange rate in the range of UAH 28 or UAH 29 per $1 in 2022-2023 and inflation will decrease to 6.2% in 2022 and 5% in 2023, Prime Minister Denys Shmyhal said.
The head of government said the relevant indicators are laid down in the Budget Declaration and the 2022-2024 Forecast of Economic and Social Development, approved by the government.
“The growth of salaries in the next three years will be approximately 8% to 10% per year (taking into account inflation). Inflation will return to the target of 5% in 2023, and it will be 6.2% in 2022,” Shmyhal said.
Consumer prices in Ukraine at the end of April 2021 year-over-year slowed down from 8.5% to 8.4% at the end of March.
The State Statistics Service said on Friday, that inflation fell to 0.7% in April from 1.7% in March, 1% in February and 1.3% in January.
In addition, the State Statistics Service in April 2021 recorded core inflation at 0.7%, which is also lower than the previous month (1.6%).
In general, for the first four months of 2021, inflation in Ukraine amounted to 4.8%, core inflation to 3.1%.
In the consumer market in April, prices for food and non-alcoholic beverages increased by 1.2%. Sunflower oil rose in price most of all (by 10%). Prices for sugar, processed grain products, rice, bread, meat and meat products, pasta rose by 5.0% to 1.0%. At the same time, vegetables, fruits, eggs and milk fell in price by 1.3% to 0.5%.
Prices for alcoholic beverages and tobacco products increased by 0.9%, was mainly due to a 1.5% rise in prices for tobacco products.
The rise in prices (tariffs) for housing, water, electricity, gas and other fuels by 0.4% was mainly due to a 2.3% rise in prices for natural gas.
Transport prices increased by 0.6%, primarily due to the rise in the cost of travel in railway and road passenger transport by 2.6% and 1.4%, respectively, and fuel and oils by 0.8%.
The Ukrainian government expects inflation of 7.3% in 2021, the National Bank of Ukraine (NBU) some 8%. According to the NBU, the peak of the inflationary surge at about 9.6% will occur in the third quarter of 2021, and in autumn inflation will start to decline. Inflation will return to the target range of 5% ± 1 percentage points (p.p.) in the first half of 2022, where it will remain in the future, the National Bank said.
Consumer prices in Ukraine in May 2020 increased 0.3%, while in March and April they rose by 0.8%, the State Statistics Service said on Tuesday.
In May 2019, price growth was higher – 0.7%, therefore, inflation in April 2020 year-over-year slowed to 1.7% from 2.1% in April, 2.3% in March, 4.1%.
According to the State Statistics Service, underlying inflation in May this year fell to 0.1% from 0.4% in April and the jump to 1.3% in March, whereas before that it had been falling for three consecutive months. Last May, underlying inflation was at the level of 0.2%, as a result, year-over-year it slowed down to 3%.
In May, prices for food and non-alcoholic beverages rose by 1.2% in the consumer market. Most of all prices of eggs and fruits went up (by 16.6% and 15.8%). Prices for grain processing products, rice, fish and fish products, and vegetables increased 2.3-0.8%. At the same time, meat and meat products, lard, butter, sugar, sunflower oil, sour-milk products, milk fell in price by 1.6-0.2%.
Prices for alcoholic beverages and tobacco products increased 1.1%, which is linked to a rise in price of tobacco products by 2.0%.
Clothing and shoes prices fell by 1.4%, in particular, clothing – by 2.0%, and shoes – by 0.7%
The decrease in prices (tariffs) for housing, water, electricity, gas and other types of fuel by 2.8% was mainly due to the reduction in the price of natural gas by 16.8%.
Transport prices decreased 2.0%, primarily due to cheaper fuel and lubricants by 8.6%.
The National Bank of Ukraine at the end of January improved its inflation forecast for 2020 from 5% to 4.8%, but in April it worsened this indicator to 6%.
According to the central bank, in the first half of this year, inflation in annual terms will be 4.8%.
Ukrainian businesses expect a slowdown in inflation and not so strong devaluation of the national currency, according to findings of a regular survey of business expectations, conducted by the National Bank of Ukraine in the second quarter of this year. “The average forex rate in 12 months is UAH 28.82 per U.S. dollar (the forecast given in Q1 was UAH 29.32 per U.S. dollar),” the NBU said in a document.
According to it, if in the first quarter of this year, respondents estimated inflation in the next 12 months at 9%, their forecast given in the second quarter is 7.7%.
The National Bank adds that Ukrainian companies have also improved their expectations for economic growth in Ukraine and the development of their own business, although the Business Expectations Index (BEI) for the next 12 months slid slightly to 117.8% from 119.7% a quarter earlier.
According to the survey, entrepreneurs began to better assess their current financial and economic situation – a positive response balance of 12.6% versus 8% in the first quarter. They expect to improve the situation thanks to the increase in production and sales, primarily for export. In this connection, companies plan to increase investment in equipment and more actively borrow funds.