Inflation in Ukraine

Ukraine - Inflation (end of period)

Inflation moderates in November

Inflation came in at 26.5% in November, which was marginally down from October’s 26.6%. The downtick was primarily due to slower growth in prices for food and non-alcoholic beverages and weaker pressures on crude oil prices. Moreover, weakening consumer demand—largely due to power outages—the stabilization of the hryvnia and the anchoring of inflation expectations further contributed to November’s reading. These factors more than offset higher prices across the board amid energy disruptions due to damage sustained to the power grid, as businesses incurred higher operating costs and passed them onto consumers.

Nevertheless, the trend pointed up, with annual average inflation coming in at 18.8% in November (October: 17.5%). Meanwhile, core inflation rose to 13.4% in November from the previous month's 12.9%.

Finally, consumer prices rose 0.71% in November over the previous month, which was notably below October's 2.49% increase. November's result marked the weakest reading since July.

Inflation has remained elevated due to the ongoing Russian invasion, which has led to supply chain disruptions, the destruction of production facilities, shortages of goods and services and higher production costs. In addition, price pressures have remained intense due to indirect consequences of the war, such as higher global commodity prices.

Looking ahead, large-scale damage from Russian attacks on energy infrastructure will exert upward pressure on inflation as households and businesses seek out alternative—and more expensive—power sources, particularly during the winter months. In its December assessment, the National Bank of Ukraine noted that inflation would remain elevated as long as the war continues as higher production costs outweigh the downward effects of weaker domestic demand. Thus, the Bank sees average inflation surpassing the 5.0% target in 2023–2024; our panelists further expect it to remain above target over the forecast horizon ending in 2027. A prolongation of the war and further damages to critical infrastructure pose the main upside risks to inflation.

FocusEconomics Consensus Forecast panelists project inflation to average 21.1% in 2023, which is up 1.4 percentage points from last month’s forecast. For 2024, the panel sees inflation averaging 12.1%.