For the third month in a row, inflation in Ukraine is slowing faster than the forecast of the National Bank.
In March, consumer inflation in Ukraine slowed on an annual basis to 21.3% from 24.9% in February. The rates of price growth are lower than the National Bank’s forecast trajectory. This was stated in the regulator’s commentary on inflation, published on Wednesday, April 12.
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“The rapid decline in inflation is due to a significant supply of food and fuel, a better energy situation, improved inflation expectations and a favorable situation in the cash segment of the foreign exchange market. “At the same time, the weakening of inflation is mainly also due to the effects of the base of comparison last year, – said the message.
The increase in prices for processed food products slowed significantly (up to 23.5% y/y). As in February, this is largely due to a better than expected energy situation. Prices for bread and flour products, confectionery, soft drinks and canned food rose more slowly. With ample supply in the domestic market and lower export prices, the value of dairy products and sunflower oil grew more slowly.
“The improvement in exchange rate expectations, including against the backdrop of the strengthening of the Hryvnia cash exchange rate, contributed to a decrease in the rate of appreciation of imported products,” the NBU noted.
Growth in prices for non-food products also slowed significantly (18.8% yoy). On the one hand, such dynamics are expected due to the baseline effects of last year. In addition, due to exchange rate improvement and inflation expectations, prices for personal care products, clothing and footwear, electronics, pharmaceuticals, furniture, household goods, and cars grew more slow
The growth rate in the value of services remained almost unchanged (15.4% y/y). Tourist, catering and hotel services rose more slowly, as did rent.
“This may be due to improved energy supply, weaker demand, and high base-of-comparison effects generated by large-scale population movements at the onset of a full-scale invasion,” NBU said.
The value of medical, insurance, veterinary, telecommunications and beauty salon services grew faster, driven by higher costs and lower supply against the backdrop of a gradual recovery in demand. Also, due to the continued high demand, the increase in prices for the services of electricians and plumbers has accelerated.
Raw food price growth slowed to 31.6% y/y.
Milk prices rose more slowly due to ample supply in the face of weak demand and falling world prices. Prices of flour, cereals and sugar rose at a slower rate, considering last year’s harvests were sufficient to meet domestic demand. Meat value growth slowed, due to the effects of lower feed prices and weak demand. The decrease in import prices and the favorable situation in the foreign exchange market led to a slowdown in the increase in prices for citrus fruits and bananas.
At the same time, prices for greenhouse vegetables and carrots rose at a higher rate, and the rate of decline in prices for cabbage slowed down. This is mainly due to the exhaustion of the temporary effects of warm weather in the winter months, the NBU said.
The increase in administratively controlled prices slowed to 13.5% y/y. Under the influence of a sufficient import supply and the strengthening of the Hryvnia cash exchange rate, tobacco products and alcoholic beverages rose more slowly in price, the latter – given weaker demand. The growth of prices for transportation services has slowed due to the stabilization of fuel prices. The moratorium on increasing tariffs for housing and community services for the population continues to contain administrative inflation.
The rate of increase in fuel prices has significantly decreased – up to 27.9% y/y. This is due to the presence of significant reserves and the drop in world oil prices.
As noted in the analysis, inflation is slowing faster than the NBU forecast for the third consecutive month due to the dominance of food supply over demand, a better situation in the energy sector, as well as consistent monetary policy of the regulator aimed at maintaining the stability of the exchange rate and increasing the attractiveness of hryvnia savings.
The improvement in inflation and exchange rate expectations is also contributing to the weakening of core inflationary pressures.
“At the same time, risks for inflationary dynamics remain primarily due to the high level of uncertainty associated with the war,” the NBU acknowledged.
It should be noted that, despite the decrease in inflation in annual terms, in March the price increase in Ukraine reached 1.5%, which increased from 0.7% in February and 0.8% in January.
At the same time, the NBU believes that they may revise the GDP forecast upwards due to a better than expected situation with energy supply.
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Source: korrespondent
I’m Liza Grey, an experienced news writer and author at the Buna Times. I specialize in writing about economic issues, with a focus on uncovering stories that have a positive impact on society. With over seven years of experience in the news industry, I am highly knowledgeable about current events and the ways in which they affect our daily lives.