The National Bank of Ukraine forecasts an acceleration in inflation, which could reach 8.5% by the end of the year. In 2025, the price growth rate should slow to 6.6%, and in 2026 it will return to 5%. According to the regulator, the acceleration in inflation is due to higher business costs for electricity and labour, partly due to “a certain weakening of the hryvnia”, higher excise taxes on fuel and a slightly worse harvest compared to last year.
In an exclusive commentary [Kommersant]oleh Ustenko , Advisor to the President of Ukraine (2019-2024), explained that higher inflation will also lead to higher prices for basic food and energy.
“If inflation rises, prices rise. So, Ukrainians should definitely expect a rise in prices, which means that life will not be easier. First and foremost, price increases are expected for the products that an average Ukrainian citizen buys. If you look at our consumption structure, almost half of the goods in the consumer basket are food. Therefore, I expect that the biggest jump in prices will be for food. However, at the same time, the price of energy may increase. Including due to the constant shelling of the energy sector,” Ustenko said.
Nevertheless, according to the former advisor to the President of Ukraine, inflation of 8.5% is not a bad indicator.
“Inflation of 8.5% compared to 30% in the year of the Great War is not a bad indicator. On the other hand, if we compare it with the inflation rate in the world today, it looks like our inflation rate is still much higher than that of the EU and the US. The European Union is trying to curb inflation to 2%, the US to 2-3%, while it is currently at 4-5%,” said Oleg Ustenko and stressed that inflation itself is not the problem. The main issue is to adjust household incomes in line with inflation.
“The problem is not that there is inflation in the country at all. The problem is that we need to make appropriate adjustments to household incomes. And this is already a problem, because we are limited in many ways – the country is at war, and adjusting the salaries of at least the public sector to this level of inflation, which is forecasted, is too risky,” the former presidential adviser said.
In his opinion, during a time of war, and therefore a limited budget, and in times of inflation, the state should focus its attention on helping those citizens who receive minimum incomes.
“When a country, like ours, has a limited budget and high inflation, it means only one thing – we need to focus our assistance only on the most vulnerable group of the population. At the same time, we need to remember that Ukraine is limited in this adjustment by the resources that are not just in our state budget. We depend on the assistance of our allies and partners. This also imposes certain restrictions on manoeuvres,” Ustenko concluded.
Author – Alyona Kaplina