By Olena Harmash
KYIV (Reuters) – Ukraine’s central financial institution stored its most important rate of interest unchanged at 13% on Thursday, in keeping with market expectations, and mentioned it will stay cautious within the coming months amid rising inflationary stress on the wartime financial system.
The central financial institution raised its inflation forecast to 9.7% on the finish of 2024 from a earlier forecast of 8.5%. Client inflation was rising quicker than it had anticipated, it added.
Official knowledge confirmed that client inflation in September accelerated to eight.6% year-on-year pushed by increased meals and vitality costs and rising enterprise prices. The central financial institution mentioned it anticipated client costs to proceed to rise in October.
Governor Andriy Pyshnyi mentioned the central financial institution’s prior selections and its prudent insurance policies had created a buffer that allowed it to take care of management over inflationary processes, whereas additionally supporting the financial system and lending to companies.
“With a view to that we don’t see causes for now to alter the speed by rising it,” Pyshnyi advised reporters at a briefing, including that the important thing fee could be maintained on the present degree till the tip of the primary half of the subsequent yr.
He mentioned that inflation had not but peaked.
The central financial institution final minimize its fee in June, reducing it from 13.5%.
WAR REMAINS KEY RISK
The conflict towards Russia remained the important thing threat for financial improvement and inflation dynamics, Pyshnyi mentioned.
“The conflict continues. And the dangers of an extra decline in financial potential stay, specifically, as a result of lack of folks, territories and manufacturing services,” he mentioned. “The tempo of the financial system’s return to regular is dependent upon the character and length of the conflict.”
Because the conflict approaches the 1,000-day mark, Russian troops management about 18% of the Ukrainian territory and are steadily advancing within the east, overwhelming Kyiv’s stretched defences with many extra troopers and weapons.
Russia additionally recurrently makes use of drones and missiles to assault Ukrainian cities and infrastructure.
Ukraine’s financial system was battered by Russia’s invasion and gross home product fell by a couple of third in 2022. The financial system returned to development in 2023, with GDP rising by 5.3% however restoration remained restricted.
The central financial institution barely revised its forecast for GDP development to 4% this yr from an earlier forecast of three.7%.
Kyiv-based funding home Dragon Capital mentioned the unfavorable affect of the nationwide electrical energy deficit and labour shortages had been largely offset by recovering exports through Odesa’s Black Sea ports. Russia’s bombardments have closely broken Ukraine’s energy sector and vitality infrastructure.
Dragon Capital additionally forecasts 4% GDP development for this yr nevertheless it says it’s much less optimistic in regards to the subsequent yr.
“Actual GDP will develop by 3% year-on-year in 2025 due to a gradual restoration in home consumption and the event of the weapon manufacturing business, however electrical energy and labour shortages will proceed to dampen development,” it mentioned.
The central financial institution expects GDP to develop by 4.3%-4.6% in 2025 and in 2026 because of important finances spending, backed by worldwide financing, rising family revenue, and a greater harvest.
Pyshnyi mentioned the federal government expects to obtain greater than $15 billion in worldwide monetary support by the tip of the yr, with the entire quantity for 2024 reaching $41.5 billion. Subsequent yr Ukraine hopes to obtain $38.4 billion, he mentioned.
