The acceleration of inflation in Ukraine in the second half of 2024 is linked to the depreciation of the hryvnia by approximately 10% since the autumn of 2023, which has impacted the cost of imported products. By the end of the year, it may reach 8-9%, according to Dimitar Bogov, a regional economist at the European Bank for Reconstruction and Development (EBRD) and former head of the central bank of the Republic of Macedonia.
"We saw how last year Ukraine reduced inflation, but this year, after low inflation in the first half of the year, it is rising again in the second. The main reason is likely the devaluation of the currency... This has a certain impact on prices, as Ukraine is currently very dependent on the import of foreign goods," he said.
According to his estimates, inflation is expected to slow to 6-8% next year.
"I wouldn’t expect inflation to return to the levels we saw in 2022, certainly not; the situation is currently under control," Bogov emphasized.
Commenting on the recent decision by the National Bank of Ukraine to maintain the discount rate at 13%, the EBRD economist stated that this rate is currently appropriate for the situation, but how the situation will develop remains to be seen.
"Given the current inflation trend, I would expect this level (of the discount rate) to remain for some time. We do not expect a significant deterioration in the inflation situation, but it will not decrease to the target level of 5% ±1% very soon," the EBRD economist added.
As reported, inflation in Ukraine fell to 5.1% in 2023 after a jump to 26.6% in 2022, up from 10.0% in 2021.
By the end of August of this year, annual inflation rose to 7.5% from 5.4% in July and 4.8% in June.
In its July inflation report, the National Bank of Ukraine (NBU) forecasted inflation at 8.5% and 6.6% by the end of 2024 and 2025, respectively.
Since the beginning of 2024, the dollar has appreciated by 8.6% against the official exchange rate, or by 3.26 UAH, and since the National Bank transitioned to a managed flexibility regime on October 3, 2023, it has risen by 12.8%, or by 4.70 UAH.
