Inflation in Ukraine is expected to peak in the second quarter and then begin to decline. This is stated in the "Inflation Report" from the National Bank.
"The acceleration of inflation in the coming months will reflect the limited supply of food due to last year's poor harvests, as well as rising production costs, including energy and labor expenses. However, this trend will not be long-lasting. Inflation is expected to peak in the second quarter and start to decrease from mid-year," the document states.
The regulator forecasts a slowdown in inflation to 8.4% by the end of 2025. According to the NBU, measures of interest rate policy, the stability of the currency market, an increase in the supply of food products with the new harvest, a reduction in the fiscal deficit, and moderate external price pressures will contribute to this inflation slowdown:
"Disparities in the labor market will put pressure on prices; however, the impact of this factor will gradually diminish as the pace of wage growth slows. Additionally, business investments in energy independence have already been reflected in prices, so against the backdrop of the anticipated reduction in energy deficits, this factor will also help decrease inflation."
It is noted that with the gradual normalization of economic functioning conditions, further improvements in the energy sector and labor market, significant reductions in the budget deficit, and the effects of the NBU's monetary policy measures, consumer inflation is expected to return to the target of 5% by 2026.
Inflation in Ukraine
Recall that the annual inflation rate for 2024 was 12%. According to the State Statistics Service, food products and non-alcoholic beverages overall increased by 14.1% over the year. The most rapid price increases were seen in vegetables, oil, and sunflower oil.
In January, it became known that the NBU downgraded its inflation forecast for this year. It is now expected that this figure will reach 8.4%.