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Hotel and restaurant workers saw the worst performance – a 6% salary drop.
The bad news is that inflation is back, after being crushed by the National Bank of Ukraine (NBU) in the last two years and that has brought the easing cycle to an end.
Inflation was 5% in 2020. This year, analysts at Sberbank expect inflation to climb toward the upper end of the NBU's target range of 4-6% amid a recovery in consumer demand and hryvnia weakening. Ukrainian consumer prices rose 0.9% m/m in December versus a 0.2% m/m decline in December 2019, pushing y/y inflation up to 5.0% from 3.8% in November.
Core inflation, which excludes the most volatile components, climbed to 4.5% y/y from 3.9% in November. The acceleration was mainly due to higher food inflation, which rose to 4.9% y/y in December from 3.2% in November amid rising global food prices.
The political situation continues to deteriorate as the number of scandals grows. Ukrainian president Volodymyr Zelenskiy honeymoon period is long over and his failure to deliver on his campaign promises of raising incomes and killing corruption has seen the support for his Servant of the People (SOTP) sink in the polls where it is now ranked fourth after the former President Petro Poroshenko’s party and the pro-Russia parties.
Zelenskiy himself remains the most popular politician in the country and would comfortably win re-election if a vote were held tomorrow, but his popularity has also been falling a the number of Ukrainians that think the country is going in the “wrong direction” rises back towards the level it was at before Zelenskiy took over in 2019.
The practical upshot of the ruling SOTP falling popularity is the party has fragmented with deputies splitting off and backing the various oligarchs that have almost 200 proxies in the Rada of 450 deputies. That means Zelenskiy no longer has a majority in parliament and cannot ram new legislation through without the support of the liberal parties of Poroshenko or opposition leader, former Prime Minister and head of Batkivshchyna (Fatherland) party Yulia Tymoshenko.
The oligarchs are becoming a serious problem and it appears that Zelenskiy is now in open conflict with his former mentor oligarch Ihor Kolomoisky. Zelenskiy banned three TV stations under the control of Viktor Medvedchuk, the head of the Political Council of the Opposition Platform, For Life Party in January, who in response is trying to impeach the president. (It will fail as the Opposition Platform doesn't have enough votes.)
Ukraine’s economy will be lifted by the return to normalcy, but the boom that should come with far ranging reforms is unlikely to appear this year.
6 UKRAINE Country Report February 2021 www.intellinews.com
