Week's balance: Quarantine easing, hryvnia strengthening, and inflation rising

16:00, 12.06.2021
4 min.

In connection with the stabilization of the epidemiological situation, the Cabinet of Ministers eased some quarantine measures, the hryvnia exchange rate strengthened by 18 kopiykas, while inflation rose to 9.5% per annum – these are the key economic developments of the outgoing week.

The second week of summer pleased Ukrainians with some positive reports related to the coronavirus pandemic and quarantine. The number of daily cases remains relatively low, below 2,000.

According to Minister of Health Viktor Lyashko, the decline in the COVID-19 incidence has been observed for the eighth week in a row, hospital load is the lowest since year-start.

"The daily number of hospitalizations is on continued decline, showing its lowest level in 2021. Following hospitalizations, the employment of covid resources of the health care system has also reached its low in 2021. Resuscitation beds are occupied by 29%, beds with oxygen – by 15%, and ventilators – by 7%. The number of discharges is almost double that of new hospitalizations," the minister said.

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According to him, the number of patients in the country's covid hospitals over the past week has dropped by 30%. The Ministry of Health expects a similar situation next week and throughout the summer period.

Today, the epidemic situation in all regions of Ukraine corresponds to the "green" level of epidemic threat.

Relaxation of quarantine restrictions

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Against the background of all this, the Cabinet of Ministers continued to soften anti-epidemic restrictions.

In particular, the government has eased rules for mass events held outdoors, at the same time noting that no restrictions shall apply, provided that all participants in the event have a negative test result for COVID-19 run 72 hours prior or a document confirming the full vaccination course.

It is now also allowed to raise occupancy caps in cinemas and other cultural institutions.

In addition, the government removed the clause prohibiting cafes and restaurants from working after midnight until 7 a.m.

Summer quarantine

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Despite optimistic trends in the COVID-19 developments, the Ministry of Health will ask the government to extend the existing quarantine throughout summer.

As noted by Viktor Lyashko, the Ministry of Health has already developed proposals on an action protocol amid a "green level" of anti-epidemic safety, which will allow more opportunities for summer recreation, business, and travel.

"Among other things, we plan to abolish theater occupancy caps, allow full-fledged functioning of gyms, and also simplify the process of citizens' border crossing upon their return from summer vacations. However, we will propose that the government consider extending the quarantine for the summer period, since the coronavirus has not been tackled yet," the minister said.

At the same time, he stressed that it is necessary to keep in place the main anti-epidemic restrictions –mandated face masks in public indoor settings and transport, as well as social distancing and hand hygiene rules.

There is hope that the trend will prevail and Ukraine, like the whole world, will be able to return to normalcy, while the national economy will once again operate at full capacity.

Hryvnia strengthening

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The Ukrainian currency continued strengthening in the outgoing week. On Monday the official rate of the National Bank stood at UAH 27.29/USD, but by week-end, the hryvnia was at UAH 27.11/USD.

In view of the national currency strengthening, the NBU, after a three-month hiatus, again entered the foreign exchange market, redeeming the surplus currency in its reserves.

According to experts with the ICU Financial Group, the hryvnia exchange rate may reach UAH 27/USD, despite the regulator's interventions.

"The situation on the foreign exchange market changed in favor of the supply, so the hryvnia exchange rate strengthened again, while the NBU resumed interventions, restraining the beef-up. In the future, the hryvnia may continue to move toward the level of UAH 27/USD and achieve it, despite NBU interventions," experts say.

It is noted that the foreign currency supply was significantly influenced by non-residents, who started actively buying Ukrainian hryvnia-denominated bonds, while residents could also sell the currency received from the redemption of foreign currency government bonds last week.

"The general situation on the foreign exchange market continues to be favorable for the hryvnia and may well lead to further strengthening in the direction of UAH 27/USD. The NBU can again buy foreign currency on the market, but, most likely, in traditional volumes of $20 million per day, which will only restrain hryvnia strengthening," the ICU noted.

Decrease in international reserves

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Last week, the National Bank said foreign exchange reserves slightly shrank in May – by 0.6%, to $27.840 billion.

According to the regulator, the slide was due to the payments on the country's external and internal obligations, which were partially offset by government's foreign exchange earnings.

"The current volume of international reserves covers 4.2 months of future imports, which is sufficient to fulfill Ukraine's obligations and current operations of the government and the National Bank," the NBU said.

Rising inflation

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The State Statistics Service confirmed the trend of continued growth in consumer prices. Thus, consumer inflation in May in rose to 9.5% year-on-year, accelerating from 8.4% recorded in April.

Compared to April this year, prices went up by 1.3%.

"In May, prices for food and non-alcoholic beverages rose by 9.9% on year. Most of all (by 75.2-13.4%) rose prices for sunflower oil, eggs, sugar, and bread. Prices for meat, pasta, processed cereal products, butter, and dairy products increased by 5.4-10.3%. At the same time, vegetables fell in price by 13.1% and fruits – by 0.7%," the State Statistics Service said.

It is also worth noting that prices for liquors and tobacco products increased by 9.3%.

The increase in tariffs for housing, water, electricity, gas and other fuels by 35.3% over the past 12 months was mainly due to the rise in prices for natural gas by 161.6% and electricity by 36.6%.

Transport prices increased by 12.2%, primarily due to a 37.4% rise in prices for fuel and oils, while travel in railway passenger transport increased by 12%. Road transport fees has risen by 7%.

Next week, the State Statistics Service will post data on Ukraine's demographics and foreign trade in goods. Parliament will return to plenary sessions and consider a number of bills important for the country's economy. Also, the weather in Ukraine will gradually approach the summer temperature indicators, albeit with the rains to which Ukrainians got used to this year. However, such weather gives reason for hopes for a good harvest, which may even set a record for some crops.

Kateryna Zhyriy

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