Transition of businesses to power generators may cause higher inflation - Ministry of Economy

Yuliya Svyridenko, First Deputy Prime Minister and Minister of Economy of Ukraine, touched upon the issue at a briefing on Thursday, an Ukrinform correspondent reports.

"Persistent power outages have and will have an impact on prices. When our energy infrastructure collapses, the cost of production also increases due to the shift from centralized sources of supply to generators. The resilience of people and businesses at the micro level and the rapid response of the government to solve issues create reasons to hope that the factor of change in Russia's aggression towards energy infrastructure will have no decisive impact on the dynamics of consumer market prices. However, we predict that this transition of businesses to diesel and petroleum power generators may cause an increase in inflation by 1-2 percentage points in 2023," Svyridenko said.

She assumed that based on the current situation, there is a high likelihood that the state budget for the next year will be amended.

"Since the adoption of the budget, the attacks on energy infrastructure have not stopped, critical infrastructure has suffered significant destruction. This undoubtedly affects the economy. It was previously estimated that the fall in GDP at the end of the year will be about 32%, now the outlook has worsened to the range of 33.2-33.5%. If the destruction of our energy infrastructure is powerful, then we cannot avoid a negative impact on the economy. Under one of these scenarios, there is a possibility that we will not be able to get on a positive growth trajectory next year, and at the end of the year we will have a slight drop in GDP. Then it will require correction," said Svyridenko.

As Ukrinform reported, on October 10, Russia carried out a massive missile attack on the territory of Ukraine. As a result of the shelling, about 70 energy objects were damaged, of which 29 were part of critical infrastructure. On November 15, the Russians launched another massive attack on energy facilities. The attack on the power system was the largest since the onset of Russian aggression. Hits targeted both generation facilities and the power transmission system. NEC Ukrenergo and a number of energy companies ran tests and undertook preparatory measures to be ready for a possible blackout in the event of further Russian attacks on energy infrastructure.