REUTERS
The Ukrainian Finance Ministry and the National Bank of Ukraine (NBU) project a sustained low inflation rate – within 5% per annum in the period of three to five years when the program with the International Monetary Fund is over.
Such a forecast was given by ministry and NBU representatives during debates about Ukraine's macroeconomic policy when answering a question about the country's outlook in three to five years.
In particular, Deputy NBU Governor Dmytro Solohub said that in three years there should be no fiscal monopoly in Ukraine, when the NBU had to cover the fiscal deficit through the issue of hryvnias.
"The NBU has predicted it before that we see a decline in inflation to 5% per year in future," Solohub said. In his words, the NBU's monetary policy is aimed at reining in inflation and its volatility, unlike the situation in the past when the rate was stable but other macroeconomic indicators were highly volatile.
"We would like to orient our economic model towards domestic demand, as we really have a huge advantage before such countries as the Baltics States or Georgia, because our domestic market is large," he said.
By developing its own market, Ukraine will be less dependent on the situation in other countries, and a floating forex rate could be used to cushion fluctuations of inner market indicators, namely unemployment, inflation, and others.
Deputy Finance Minister Artem Shevalev in turn said that in the 3-5 years' outlook, there will be a drastic reduction in the share of the state in redistribution of GDP, which, according to experts, is now 50%. "To describe it in short: in three to five years there will be a drastic reduction in the state's share in the economy, including through state-owned companies, which will be privatized. The state will withdraw from state banks, which will be offered for privatization," he said.
Shevalev also said the state's role is expected to shrink in the distribution of funds in the economy. "It will be partly achieved due to the reform of the pension system. There will probably be a transition to a defined contribution pension system, or a system with a significant part of defined contribution," he explained.
In his words, the achievement of the NBU's projected inflation and economic growth will act as prerequisites for restoring lending to the real sector of the economy at reasonable rates. They will let the state borrow funds on the domestic market, giving the simultaneous opportunity to avoid currency risks.