The National Bank predicts nearly a twofold increase in inflation in Ukraine

According to the forecast of the National Bank of Ukraine, inflation in Ukraine will increase by 1.9 times this year, rising from 5.1% in 2023 to 9.7%.

The December macroeconomic and monetary review by the National Bank of Ukraine indicates that the annual growth rate of consumer prices has already reached this level.

“Actual consumer inflation accelerated (to 9.7% year-on-year) and exceeded the National Bank of Ukraine’s forecast trajectory. Food inflation increased due to the greater-than-expected impact of adverse weather conditions on agricultural crops. Administrative inflation and fuel prices also rose faster than anticipated. According to the National Bank’s estimates, price growth continued in November,” the document states.

The National Bank highlighted the following factors contributing to the price increases:

• In October, food inflation accelerated sharply due to the effects of hot, rainless weather during the summer and autumn, which affected crop yields, ripening times, and the quality parameters of food products, particularly certain vegetables and fruits.
• Prices for processed food products rose faster due to the increase in raw material costs and the further rise in production costs for energy and labor.
• Price growth in food processing accelerated, particularly in the production of dairy, flour, and meat products, driven by rising raw material costs and production expenses.
• Prices for non-food goods also grew faster, primarily under the influence of exchange rate fluctuations in previous periods. This likely slowed the decline in prices for clothing and footwear. Prices for services, including healthcare and communication, also increased more rapidly due to higher production costs.
• The cost of alcoholic beverages and tobacco products rose faster, influenced by the weakening of the hryvnia exchange rate in prior periods and efforts to combat the shadow economy.
• Prices for pharmaceutical products, medical goods, and equipment also accelerated in growth.

“In November, business expectations worsened against the backdrop of rising energy shortages, labor shortages, and reduced availability of high-quality agricultural raw materials,” the National Bank of Ukraine’s analysis notes.