Page 21 - UKRRptDec19

"Surprisingly, the food industry is unable to demonstrate a positive trend despite a plentiful raw commodity supply, ensured by a record-high harvest for two years in a row." Concorde has downgraded its forecast on industrial output, expecting a 1% y/y contraction in 2019 instead of the previously expected zero growth. Ukraine’s industry increased 1.6% y/y in 2018.
4.2​ Inflation
Ukraine’s fundamental inflationary pressure is falling says the National Bank of Ukraine (NBU). ​The NBU disclosed more details of its October decision to cut its policy rate by 1.0pp​ to 15.5% in its minutes of the monetary policy committee meeting published on Nov. 4. It revealed that committee members unanimously agreed on lowering the key policy rate by 1.0pp.
While justifying this decision, the committee members emphasized that fundamental inflationary pressure (core inflation) ​is weakening faster than was expected​ in the NBU’s inflationary report in July. The excessively hard monetary policy might result in appreciation of the real effective exchange rate, which might result in the enlargement of current account’s deficit. Meanwhile, lower key policy rate should stimulate crediting and economic growth.
The NBU believes that the major factor of accelerated inflation cooling was appreciation of the national currency. The favorable situation at the currency market, coupled with lowering inflation, positively affected the inflationary expectations of business and consumers, giving additional reasons for softer monetary policy.
The committee members also discussed the major risks related to the updated NBU’s forecast, which assumes annual economic growth of 3.5-4.0% yoy for 2020-2021 and the inflation target of 5% yoy to be reached by the end of 2020. These risks include delays with ​securing a new program of IMF financing​ and rising threats to macroeconomic stability, which might surface "as a result of Ukrainian courts’ decisions," likely referring to rulings and appeals in Privatbank litigation.
21​ UKRAINE Country Report​ December 201 ​ ​www.intellinews.com