The hryvnia has noticeably depreciated, but inflation is not growing: March-April CPI 3.2%. In addition, there is not even a seasonal surge in prices due to the traditional increase in business activity in the spring. This means that there is a decline in the economy of Ukraine.
Nataliya Boyko, CO-CEO, founder of SpiceProp, told about it.
"Given the energy problems, it is possible that a decline is already underway, which may continue if the government cannot ensure a stable energy supply before the autumn-winter period," the specialist noted.
According to her, the economic recession with its disinflationary effect is currently covering the exchange rate growth of inflation. Ukraine's financial stability is ensured by foreign aid. But if the flow of foreign aid is not constant, then economic problems will begin to break through into the financial sector.
Then the decline of the exchange rate may accelerate, and, despite the further decline in the economy, there will be an inflationary surge with a simultaneous fall in incomes. Such a combination is not only a recipe for a local crisis, but also a harbinger of future structural restructuring of the economy. Basically, the economy will need major changes in its structure in order to adapt to new, unfortunately, more difficult conditions.
In order to avoid this scenario, Ukraine needs both the maintenance of financial assistance from partner countries, which will strengthen public finances, and significant investment programs that will ensure the nourishment of the real sector.
Otherwise, a moderate devaluation of the hryvnia to the mark of 42.5 UAH/USD is predicted by the end of 2024 may be more dramatic.
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