Natalia Zinets

KYIV (Reuters – Ukrainian inflation is currently at a high of 10.3% after four years. However, it will likely slow down this year, but still exceed the central bank’s 5% target because of high gas and food prices.

In order to help an economy recovering from the COVID-19 epidemic, the National Bank of Ukraine raised its interest rate five times to 9.0% in 2021.

NBU also considers the potential risks associated with a military confrontation against Russia. Kyiv has been alarmed by the presence of Russian military equipment and troops near Ukraine’s borders.

The Reuters poll revealed that analysts at Ukrainian banks and brokerages expect 2022 inflation to be 6.7%, compared to 10.2% 2021.

Vitaliy Valeryshchuk of the ICU brokerage said, “Inflation is still above the central banks’ target due to a mixture of supply-side factors.” He added that food prices were the primary driver.

Vavryshchuk stated that the prices for oilseeds and grains are currently 20-30% higher than last year, and this also impacts on the price of milk and meat products.

The State Statistics Service data showed that food prices rose 13.9% annually in November. Bread prices were 18.1% higher, and the price of meat and milk rose 13% and 10.1%, respectively.

Konstantin Fastovets of Adamant Capital stated that “There are two primary risks to price stability”: the high prices for energy (especially natural gas), and the continuing tension on Russia’s border.

He said, “It will prove very difficult for central banks to handle both factors.”

The price of gas in Ukraine doubled between April-September and the same period in 2020.

The tariffs charged to households by the government during winter heating seasons that lasts until April were capped. Analysts believe that these caps will soon be lifted to comply with the $5 billion government-IMF deal.

According to analysts, Ukraine’s economic growth would be 3.3% in 2022 following an expected 3.0% increase in 2021. In addition, the currency will weaken to 28.1 Ukrainian hryvnias for $1 within 12 months from its current 27.3.