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Economy 2019-01-19T04:01:24+02:00
Ukrainian news
2018 Inflation Exceeds NBU Forecast Due To Growth Of Tariffs And Rising Of Salaries

2018 Inflation Exceeds NBU Forecast Due To Growth Of Tariffs And Rising Of Salaries

The National Bank of Ukraine (NBU) states that inflation in 2018 exceeded its forecast due to the growth of administratively regulated prices and tariffs, as well as due to the growth of production costs amid rising salaries.

The NBU said this in a statement, Ukrainian News Agency reports.

"Consumer inflation slowed from 13.7% in 2017 to 9.8% in 2018, according to the State Statistics Service. This indicates a reversal of the trend of inflation growth that was observed in 2017, and the weakening of the fundamental inflationary pressure on the Ukrainian economy. It happened first of all, due to the tight monetary policy of the National Bank", the statement reads.

At the same time, despite the expected decrease, by the end of the year inflation expectedly exceeded the goal of the National Bank by 6% ± 2 percentage points by the end of 2018, settled by the Basic Principles of Monetary Policy for 2018 and the midterm.

The NBU notes that in the course of the past year, in order to reduce inflation to target goals in the medium term, the regulator's board increased the discount rate four times - by only 3.5 p.p. to the current 18.0% per annum.

This led to an increase in interest rates and, respectively, gave incentives to increase savings.

Besides, this led to the strengthening of the hryvnia against the currencies of the countries - the main trading partners of Ukraine.

Also, inflation slowed down due to favorable pricing environment for Ukrainian exports in foreign markets in the first half of the year and a record grain harvest in the second half of the year, which supported high currency supply in the interbank foreign exchange market, and also created conditions for strengthening the hryvnia.

The expansion of the domestic supply of some foods due to high yields of fruit and oilseeds, an increase in the production of poultry products, as well as a decline in world food prices were additional factors.

At the same time, inflation for the year deviated from the goal mainly due to the effect of factors on which monetary policy has a limited impact.

It is primarily about increasing administratively regulated prices and tariffs, increasing production costs under the influence of salaries increase, increasing world oil prices for most of the year, as well as narrowing the supply of borscht vegetables due to adverse weather conditions.

An important driver of inflation was also consumer demand, which grew due to salaries increase.

In the first 11 months of 2018, real salaries were 12.8% higher compared to the same period in 2017.

Also for most of the year, significant factors that influenced economic sentiment were uncertainty regarding the resumption of cooperation with the International Monetary Fund and high external risks.

The National Bank will continue to direct its policy towards a slowdown in price growth and the achievement of the medium-term inflation target of 5% ± 1 p.p.

As Ukrainian News Agency earlier reported, in 2018 consumer prices increased by 9.8%.

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