Inflation could reach 10% by the end of this year
The inflation rate in Ukraine reached 7.7% year-on-year in July. The National Bank of Ukraine predicts that this figure will rise to 10% by the end of the year before gradually slowing down. This was reported by Delo.ua citing the National Bank of Ukraine, according to the portal PromPolitInform.
Following a period of brief price decreases during the spring and summer, inflation figures have once again shown an upward trend. In July, the cost of goods and services increased by 7.7% compared to the same period last year.
The acceleration of inflationary processes is driven by a complex combination of external and internal factors. In particular, constant attacks by the rf on energy infrastructure have led to higher electricity costs, while global instability caused by the conflict in the Middle East is driving up fuel prices.
Beyond energy-related challenges, the economy is under pressure from the weakening of the hryvnia observed at the beginning of the year. Businesses are also facing rising operational costs, including mandatory spending on restoration following air strikes and salary increases aimed at retaining staff amidst labor shortages.
Drivers of consumer demand
Strong consumer demand remains a key driver of price increases. It is supported by both state budget expenditures and rising household incomes, which compel employers to compete for talent across various sectors.
The National Bank of Ukraine projects that inflation may approach 10% by year-end. The regulator intends to counter this through active participation in the foreign exchange market to minimize exchange rate volatility and by maintaining a high key policy rate to encourage hryvnia-denominated savings.
In the long term, a decline in inflation is expected. According to the financial regulator’s plans, inflation should slow to 6.9% in 2027 and reach the NBU’s target of 5% by 2028.
Path to price stabilization
Positive impacts on price dynamics are expected from the gradual reduction of the budget deficit and the restoration of a stable energy sector, according to the NBU. The agro-industrial sector also plays a critical role, as the anticipated growth in harvests will help contain food price inflation.
The regulator emphasizes that these measures are intended to reduce pressure on the national currency and cool excessive consumer demand, which is a prerequisite for long-term macroeconomic stability.
Photo: Delo.ua
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