Here are the reasons for the slowdown of inflation in Ukraine and new risks for an opposite trend.

Several factors influenced the slowdown in inflation in January of this year. For example, aggregate demand has decreased significantly – by 25% compared to before the full-scale invasion, said ex-chairman of the NBU Council Bohdan Danylyshyn. In addition, the decrease in demand is influenced by the war, the departure of refugees abroad, the mobilization of Ukrainian males, a high unemployment level, the NBU’s strict monetary policy, which limited the growth of lending, and the oversaturation of the domestic market with agricultural products due to a record harvest. Compared to the previous month, the prices of almost 60% of the monitored food products fell in January. An important restraining factor for inflation is the stability of the exchange rate, which has remained at the level of ₴37-38 per $1 for 1.5 years, contributing to price stabilization for imported goods. In the future, low consumer demand will restrain inflation. At the same time, the increase in electricity tariffs, the restoration of taxes on automobile fuel, a significant fiscal deficit, and potential risks of devaluation for the hryvnia remain significant pro-inflationary risk factors.

UBN

Ukraine War 24

Ukraine War 24

Read Previous

Another 10 million Ukrainian refugees will flee to Europe if Putin wins the war.

Read Next

The EU and the US have given their assurance that their support for Ukraine will not change after Ukraine’s change in military leadership.