The National Bank said when inflation will return to single digits

03 August 2022, 11:45 | Economy
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As a result of the effects of the war, inflation in 2022 will exceed 30%, but will start to slow down from next year, although it will remain above the NBU's target of 5%. It is reported by the National Bank of Ukraine.

The main factors that will increase price pressure in Ukraine:.

disruption of supply chains as a result of war,.

reduction in the supply of certain goods,.

increase in business costs.

physical destruction of production facilities and infrastructure,.

temporary occupation of certain territories,.

persistence of high energy prices and record levels of inflation in partner countries.

In addition, inflation expectations of businesses and households have also risen significantly.. In practice, this was reflected in a deterioration in the term structure of deposits in the banking system and an increase in spending on certain durable goods, mainly imported.

As a result, in recent months, inflation has been growing at a high rate and reached 21 in June.. 5% (year to year).

Supply shocks in a full-scale war will continue to have a significant impact on price dynamics. In the coming months and beyond, we expect:.

there is a high probability of further terrorist attacks by Russia on infrastructure facilities and production facilities in the cities of Ukraine, which will undermine logistics, increase business risks and undermine expectations,.

high world prices for energy carriers, primarily for gas, will also remain.

maintaining high levels of energy prices will require a revision of tariffs for housing and communal services to reduce quasi-fiscal imbalances.

Therefore, despite tight monetary conditions due to the interest rate policy of the NBU, foreign exchange interventions and foreign exchange restrictions, inflation will still grow and by the end of the year will slightly exceed 30%.

As of July 2022, the key levers in curbing inflation remain:.

administrative measures of the NBU and the government of Ukraine, primarily fixing the hryvnia exchange rate and tariffs for gas and heat,.

adjusting the supply of products across western borders,.

excess supply of agricultural raw materials formed as a result of the blockade of seaports.

At the same time, from the beginning of 2023, a decrease in security risks is expected, which will lead to the restoration of logistics and the possibility of increasing crop yields..

These developments would have a positive impact on expectations and would also directly dampen the pro-inflationary effect of supply-side shocks..



Also, the decrease in inflation in Ukraine will be facilitated by the gradual subsidence of global inflation and subsequent tight monetary conditions as a result of the policies of the NBU.. Consumer and investment demand will remain subdued for quite a long time, which will also help slow down inflation..

Taking into account the consequences of the war and the significant contribution to the increase in administrative prices, inflation:.

in 2023 will drop to 20. 7%.

in 2024 - up to 9. four%,.

inflation is expected to return to the 5% target in 2025.




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