Electricity, medicines and food are among the leaders in annual price growth
28 February 17:14
The growth in industrial producer prices in January 2025, compared to December 2024, slowed to 0.6%, the lowest since March last year. This was reported by Danylo Hetmantsev, Chairman of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy, citing data from the State Statistics Service, according to
Nevertheless, industrial inflation continued to accelerate on an annualized basis, reaching 32.5% in January (by January 2024). According to the MP, this dissonance is due to the low base of the previous year, which saw a significant decline in producer prices in the first quarter.
According to Danylo Hetmantsev, the following industries have seen the largest increases in producer prices (again, by January 2024):
– Supply of electricity, gas, and steam (plus 53%);
– Manufacture of pharmaceutical products (plus 35.9%);
– Food production (plus 20.6%).
What will happen next and why
The parliamentarian predicts that in the next two months, annual industrial inflation will continue to accelerate to 40%, putting pressure on consumer prices. This will happen directly through the cost of raw materials, which affects the prices of food, medicines, etc., and indirectly through the cost of labor and energy, which are included in the cost of production.
“The full-scale war, which has been going on for three years, is objectively turning into a constant pro-inflationary factor. At the macro level, this impact is manifested through a huge double deficit of the budget (approximately 24% of GDP, without grants) and foreign trade (current account, approximately 7% of GDP), which is closed at the expense of international aid. At the micro level, it is due to the growth of business costs for energy supply, labor, logistics, etc.”, says Danylo Getmantsev.
According to his estimates, the situation is now under control, as we have a fully covered need for budget financing for 2025 and part of next year, and sufficient international reserves to maintain exchange rate stability. In other words, in terms of macro-financial stability, the financial situation is objectively better than at the beginning of the full-scale invasion.
However, according to him, it is also true that the country is entering a period of the greatest turbulence since March 2022.
What to do
As long as the military, political, and economic uncertainty continues, Danylo Hetmantsev believes that it is advisable to
– introduce strict military censorship of non-priority budget expenditures (we are talking about ineffective support programs, capital expenditures that can wait, and the maintenance of government agencies)
– strengthen de-shadowing in all areas of fiscal and financial policy (the resource of which is in the tax sphere alone plus $4 billion in additional budget revenues)
– take measures to reduce the foreign trade deficit and shadow capital outflow.
All of this, the MP states, will help save the country’s international reserves.
EBRD downgrades Ukraine’s growth forecast
Ukraine’s economy, which grew by 3 percent in 2024 despite the pressure of Russia’s full-scale war, is projected to grow by 3.5 percent in 2025 and strengthen further to 5 percent in 2026, provided an agreement is reached to end hostilities this year. This is stated in the main report of the European Bank for Reconstruction and Development and
The EBRD attributed the resumption of inflation in the second half of 2024 to rising electricity costs, adjustments in regulated utility prices, rapid growth in real wages, and the devaluation of the currency against the US dollar after the exchange rate peg was loosened in October 2023. The bank states that annual inflation reached 12 percent in December 2024 and is likely to remain at the same level in the first half of 2025 before falling to single digits by the end of the year.
