NBU explains sharp slowdown in inflation
15 March 2024 11:22
In February 2024, consumer inflation in Ukraine slowed to 4.3% in annual terms. This was reported by Kommersant Ukrainian 
citing a commentary by the National Bank of Ukraine (NBU).
The National Bank noted that the price growth rate was lower than the trajectory of the NBU’s January forecast.
“In February, inflation decelerated faster than forecast. This dynamics was driven by an increase in the supply of certain food products, secondary effects from significant harvests, a controlled situation in the foreign exchange market and the continued moratorium on raising utility tariffs,”
– the report said.
Raw food prices fell, while prices for fuel, alcoholic beverages, and tobacco products grew at a slower pace. At the same time, underlying inflationary pressures, as reflected in core inflation, eased less than the NBU expected in February. This was partly due to the effects of the blockade of the western borders, which led to higher prices for certain food and non-food products. Prices were also pressured by a gradual increase in wages amid a labour market shortage.
Raw food prices decreased by 0.3% yoy
Eggs fell significantly year-on-year, driven by increased production and a shift in producers’ focus to the domestic market. The effects of last year’s bumper harvests supported further price reductions in sugar, cereals and flour. The price of greenhouse produce, particularly tomatoes and cucumbers, declined. The rise in prices for meat, particularly pork and poultry, slowed. Due to warm weather and increased sales of products from storage, the price of certain borscht vegetables rose more slowly. In contrast, the price of potatoes and apples remained high due to a limited supply of quality produce. The growth in raw milk prices accelerated slightly as the supply of imported products declined.
The growth rate of administratively regulated prices slowed to 10.1% yoy
Alcoholic beverages and tobacco products continued to grow more slowly as production cost pressures and pressure from illegal products eased. The moratorium on increases in utility tariffs for households continued to restrain administrative inflation. On the other hand, prices for pharmaceuticals accelerated.
Fuel prices increased by 5.0% yoy
Fuel prices resumed their growth in February. This was driven primarily by logistical difficulties, which affected the price of automotive gas, and by rising global oil prices.
Core inflation declined to 4.5% yoy
The rise in prices for processed food products accelerated slightly (to 5.6% yoy). In particular, dairy products grew more rapidly. This may be a result of the border lockdown, which led to a smaller supply of imported products, additional logistics costs, and shorter sales periods for these goods. Long-term storage goods, such as coffee, tea, and culinary herbs, also grew more rapidly. At the same time, prices for bread, flour, and confectionery products grew more slowly.
Prices for sunflower oil continued to decline, but prices for processed products accelerated. Prices for non-food products continued to decline (by 0.5% yoy), mainly due to a deepening drop in prices for clothing and footwear. At the same time, prices for other non-food products grew more slowly than in January, which may be explained, in part, by the controlled situation on the FX market.
The growth rate in the cost of services decelerated to 9.8% yoy in February, primarily due to lower pressures from food and energy costs. In particular, the growth in the cost of certain medical, transport, telecommunications, insurance, cinema, and other services slowed. On the other hand, financial services, the cost of operating personal vehicles, and personal care services grew more rapidly, including due to pressure from labour costs.
In February, inflation decelerated faster than forecast. This dynamics was driven by an increase in the supply of certain food products, secondary effects from a bumper harvest, a controlled FX market, and the continued moratorium on raising utility tariffs.
At the same time, core inflation declined more slowly than projected under pressure from a decline in the supply of certain imported goods and higher labour costs.
