Inflation may be lower than predicted 12% in 2016 – NBU

Monday, April 11, 2016 - 17:40 (EEST) Section: Latest news

The National Bank of Ukraine (NBU) admits that inflation in 2016 could be lower than the forecast of 12%, the NBU said in a comment.

”There is a probability that inflation in 2016 will be lower than the forecast of the National Bank (12.0%). However, most of the factors that have led to lower inflation in the first quarter, have a short-term nature and most probably their impact can be reversed over the next quarters,” the report reads.

The regulator notes that in general, in the first quarter of 2016, consumer inflation was 1.6%, that is significantly less than the forecast of the National Bank (4.0%), published in January inflationary report.

The National Bank explains the deviation from the forecast estimates by an increase in the supply of raw food products. Firstly, due to reduced export opportunities for domestic producers. This is because of the Russian restrictions on trade and transit through its territory, as well as the ban of Israel and the Middle East on the import of eggs from Ukraine. Secondly, the supply of certain imported fruits and vegetables has been increased, especially from Belarus, Turkey. As a consequence, prices for raw foods rose by only 0.2% in the quarter compared with the predicted growth of 7.6%. In addition, price wars of tobacco manufacturers have led to a more moderate growth of administrative regulated tariffs (2.1%) compared with the NBU forecast (3.3%).

At the same time, the actual core inflation was 2.3% in the first quarter and its slowdown in annual terms to 15.0% corresponded to the NBU`s current forecast.