Ukraine: Inflation jumps to nearly two-year high in February
March 7, 2014
In February, consumer prices increased 0.6% over the previous month, which was up from the 0.2% rise registered in January and represented the largest monthly increase since May 2011. The increase was broad-based, with all but one component of the index increasing in February. The largest increases were registered in transport as well as in food and non-alcoholic beverages, whereas clothing and footwear was the only category in which prices dropped. Annual inflation jumped from January's 0.5% to 1.2% in February, which marked the highest rate since March 2012. Despite the acceleration in recent months along with developments in the political sphere and in the foreign exchange market, inflation remains well below the Central Bank's 4.0%-6.0% target range for 2013-2014. Meanwhile, annual average variation in consumer prices inched up from January's minus 0.2% to minus 0.1% in February. Inflation is likely to continue rising in the coming months, mainly due to higher energy costs, as Russian state gas producer, Gazprom, has warned that it may increase the gas price for Ukraine after the first quarter. As part of the bailout deal reached in December, the Russian government offered Ukraine a discount on Russian gas supplies. However, the negotiation stipulated that the price must be revised every three months. Against this backdrop, FocusEconomics Consensus Forecast panelists expect inflation to end 2014 at 5.6%, which is up 1.1 percentage points from last month's forecast. For 2015, the panel sees inflation rising to 6.8%.