Inflation to slow down to 18.7% in 2023 - NBU outlook

The National Bank predicts a slowdown in inflation to 18.7% in 2023. This will be facilitated by continued tight monetary conditions, a decrease in global inflation, and weak consumer demand amid power outages.

That’s according to the National Bank Governor, Andriy Pyshnyi, who spoke at a briefing on Thursday, an Ukrinform correspondent reports.

According to the NBU, in 2022 consumer prices increased by 26.6%. At the same time, over the last three months, the inflation rate in annual terms saw almost no changes.

“The stabilization of inflationary pressure was facilitated by the de-occupation of territories, the expansion of food supplies, and weak consumer demand in the conditions of Russia's energy terror. Fixed tariffs for housing and utility services, a fixed exchange rate of the hryvnia, and the restoration of logistics kept inflation at bay," the NBU chief noted.

According to Pyshnyi, the measures undertaken by the National Bank, including the introduction of deposit instruments for currency risk hedging, as well as the limited amount of budget monetization, contributed to stabilization of the cash currency market at the end of 2022. At the same time, price pressures remain significant due to the war effects, including the destruction of businesses and infrastructure, disruption of production and supply chains. In addition, business costs continued to rise as a result of Russia's energy terror. Inflationary expectations, despite stabilization, remained elevated.

The head of the NBU added that receiving the announced volumes of international aid and joint action by the National Bank and Government to intensify the domestic debt market will allow avoiding emission financing of the budget deficit and balancing the currency market.

"In the coming years, inflation will slow down faster due to the reduction of security risks, full recovery of logistics, and larger harvests. The National Bank expects it to decrease to 18.7% in 2023, 10.4% in 2024 and 6.7% in 2025. The main contribution to inflation in these years will be the administrative component due to the need to bring tariffs for housing and utility services to market levels," Pyshnyi said.

As reported, in December 2022, the pace of consumer inflation remained at the level of the previous month – at 0.7% per month. Annual inflation stood at 26.6%.