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Economy 2020-06-15T06:04:59+03:00
Ukrainian news
NBU: Doubling Minimum Wage To UAH 3,200 Adds 2-2.5 p.p. To Inflation In 2017, Increased Pensions Will Add 0.3-

NBU: Doubling Minimum Wage To UAH 3,200 Adds 2-2.5 p.p. To Inflation In 2017, Increased Pensions Will Add 0.3-0.6 p.p.

NBU, pension, minimum wage, inflation

The National Bank of Ukraine says the doubling of minimum wage to UAH 3,200 effective from January 1, 2017, has added 2-2.5 percentage points to the 2017 inflation and the increase in pensions effective from October 1 will add 0.3-0.6 p.p. to the inflation in 2018.

The press service of the National Bank said this to Ukrainian News Agency.

In January 2017, the central bank revised upward its inflation forecast for 2017 to 9.1% from 8% following the decision to double the minimum wage.

The National Bank says the decision has added to the inflation twice as much as the central bank expected in January.

"However, the influence of doubled minimum wage on inflation was insignificant from the side of consumer demand," said the NBU.

"However, overall, the quick growth in wages (in August the average nominal wage grew by 37% year over year, the average real wages increased by 17%), which was caused mostly by deficit of adequate manpower in the market, and social transfers against the background of improving consumer sentiment of the population facilitated acceleration of private consumption," said the NBU.

The pension reform will also facilitate private consumption and form additional pressure on inflation, but the NBU believes the influence of the pension reform on the inflation will be minor because the spending of the budget for pensions will be compensated (the budget deficit will remain less than 2.5% of GDP in 2017 and 2018).

The NBU did not comment on the influence of projected increase in minimum wage to UAH 3,723 on inflation. The central bank says it has taken the projected increase in minimum wage into account in the new inflation forecast for 2018 (7.3%).

The NBU specifies that it considers the question of increasing social standards in package.

If social standards grow faster than the productivity of the economy, there may appear additional inflations risks.

"This will require tougher monetary policy of the NBU to achieve the inflation targets," said the NBU.

As Ukrainian News Agency earlier reported, on October 26, the National Bank of Ukraine increased the discount rate effective from October 27 from 12.5% to 13.5%. This was a reaction of the central bank to the acceleration of inflation in September to 16.4% year over year.

The NBU also revised upward the inflation forecast for 2017 from 9.1% to 12.2%.

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