The calm before the storm? Inflation is slowing down, but experts are preparing for the worst
4 July 2024 17:20
The Ukrainian economy is demonstrating remarkable resilience in the face of war, according to a recent report by the Ministry of Economy of Ukraine on inflationary processes, reports "Komersant Ukrainian"
Thus, in the first five months of 2024, consumer inflation in Ukraine slowed to 3.3% year-on-year, the lowest rate in three years. This level is close to that of some European countries that are not at war.
This low inflation rate is due to a unique combination of factors. On the one hand, large-scale migration of the population has led to a decline in consumer demand. On the other hand, the supply of goods on the market remains high, thanks to a good harvest in 2023, the economy’s rapid adaptation to wartime conditions, and increased imports. This has created a situation where supply exceeds demand, which is holding back price growth. Prices for food and non-alcoholic beverages even showed deflation of 0.5% year-on-year
However, experts warn that this situation may be temporary. Continued destruction of infrastructure, problems with electricity supply, rising logistics costs and other “warlike obstacles” for business may lead to a shift in the balance of factors in favour of accelerating inflation in the future.
Despite the overall slowdown in inflation, some sectors of the economy are experiencing price increases. In particular, prices in the healthcare, catering, hairdressing, internet, and automotive sectors have risen. This indicates a complex structure of inflationary processes in the Ukrainian economy.
That is why, while the Ministry of Economy reports on the resilience of the economic system, Western media write that Ukraine is one month away from default.
