Inflation to rise in Ukraine – economy ministry

Ukraine's Ministry for Economic Development, Trade and Agriculture says it expects that inflation will rise in the country from the beginning of 2021, despite its current low rates.

That is according to the inflation outlook for August 2020, published on the ministry's website on September 29.

Prices

"In August 2020, as expected, consumer prices continued to decline seasonally. At the end of the month, deflation was 0.2%. However, the rise in prices slightly accelerated year-over-year [y-o-y] to 2.5% (2.4% in July), which was mainly a result of the August increase in utilities prices (due to a significant rise in the price of natural gas, by 37.7%)," the document said.

Since the year-start, the prices have grown by 1.2%, which has been a record low rise in recent years, the ministry said.

Forecast

Read alsoInflation accelerates to 2.5%: DetailsToday, the price dynamic is within the predicted threshold (5.9% by the year-end) and corresponds to the general trend of positive economic development despite some easing in terms of preventing inflationary risks and the National Bank's policy.

"It is expected that gradual saturation of the economy with money in order to revive it will obviously form more significant pressure on price dynamics as a result of the cumulative effect, which is likely to significantly manifest itself only at next year-start ," reads the outlook.

Previous indicators

At the same time, the ministry emphasizes that the lowest inflation was back in 2013, with a 0.6% deflation reported then.

Inflation in August stood at 2.5% year-over-year (half the target).

The ministry added that in August, almost all goods and services experienced a seasonal slowdown in price growth or even a decline in prices, except for natural gas for households, although the price was lower than in 2019.

The draft national budget for 2021, approved by the Cabinet of Ministers, is based on a 7.3% inflation forecast.

Inflation in Ukraine: Background

• On August 3, the National Bank of Ukraine raised the inflation outlook for 2020 to 6% from 4.8% predicted earlier, while leaving it within the target range of 5% +/- 1 pp.
• Consumer inflation in Ukraine in June 2020 stood at 2.4% y-o-y, remaining at the level of June 2020, according to the State Statistics Service.
• The National Bank predicts that inflation will be within the target range of 5% +/- 1 pp by the end of the year due to the gradual recovery of the global economy and a rise in energy prices.
• Inflation in Ukraine in 2019 slowed to 4.1%, hitting a six-year low.