Ukraine: Inflation drops to lowest level since November 2020 in January
Inflation dropped to 4.7% in January, following December’s 5.1%. The reading marked the lowest inflation rate since November 2020. The moderation was primarily due to slower growth in prices for food and non-alcoholic beverages.
Accordingly, the trend pointed down, with annual average inflation coming in at 11.6% in January (December: 13.4%). Meanwhile, core inflation fell to 4.6% in January, from the previous month’s 4.9%.
Finally, consumer prices rose 0.40% in January over the previous month, moderating from the 0.69% rise seen in December. January’s result marked the weakest reading since August 2023.
EIU analysts commented on the inflationary outlook:
“The pace of disinflation will slow in 2024 as the one-off effects of a 2023 fall in food prices caused by export constraints disappear and economic growth picks up. […] Expansionary fiscal spending remains a risk, but the concentration of government expenditure in a single sector, the managed float in the first half of the forecast period, and the financing of deficits through aid and concessional loans will prevent a serious build-up of inflationary pressures in the wider economy.”
Commenting on the monetary outlook, Goldman Sachs analyst Andrew Matheny said:
“We have a more benign inflation outlook than the National Bank of Ukraine (NBI) (with today’s print, inflation is already below the NBU’s +5.0% forecast for March inflation) and we believe that the NBU will continue the cutting cycle as soon as Q2, until the key rate reaches +12.0% by year-end. The main risk to our forecast relates to uncertainty over Ukraine’s external financing outlook (given political developments in the US).”