Ukraine Ends 2019 with Full-Year Inflation of Only 4%

January 13, 2020

Ukraine’s officially reported consumer price inflation has come in at 4.1% YoY for full-year 2019 following the December data published by the State Statistics Committee (UkrStat) last week. The rolling 12-month inflation figure slowed sharply during the autumn, and it had been 5.1% YoY after the November data. Major consumer price categories showed the following full-year rises: food +4.9%, clothing -2.3%, utility services -1.9%, healthcare +3.8%. The highest jump in subcategories was in railway tickets, which rose in price by 19.2% in 2019. For December alone, the CPI index moved down by 0.2% MoM. Meanwhile, in producer prices it was a 7.4% YoY decline in 2019. In major producer price categories, extraction sector prices dropped by  22.8%, aggregate manufacturing prices decreased by 5.7%, and utility sector prices declined by 5.6% over 2019.

The actual FY19 consumer inflation came well below the initial consensus forecast of 7.3% YoY. The main factor behind the restrained inflation last year was a substantial revaluation of the hryvnia, with the national currency appreciating by 13.6% YoY from 27.70 UAH/USD to the current level of 23.92 UAH/USD. Last year’s inflation in the country was the lowest since 2013, when consumer prices rose by just 0.5% YoY amid then-President Yanukovich’s attempt to lock down utility prices for households using strict regulatory means. Our current projection for consumer inflation in 2020 is 5.5%, assuming the economy stays on the recovery path. The National Bank also sees an inflation target close to 5% for 2020. This means that the NBU is likely to lower its key refinancing interest rate further at its scheduled monetary board meeting on Jan 30. We expect the rate to be slashed from 13.50% to 12.00%, with further easing in March.

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