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swaps. From July 1 the terms for long-term refinancing loans are be limited from five to three years. The volume of auctions was also reduced: from July - up to UAH 5 billion, from August - up to UAH 4 billion, from September - up to UAH 3 billion.
Number of nonbank market participants decreased in August. In August 2021, 8 new companies entered the nonbank financial services market in Ukraine, while 13 left. The number of nonbank financial market participants decreased from 1,938 (as of July 31) to 1,933 (as of August 31) . The number of banks decreased from 73 to 72. The nonbank financial market consisted of 153 risk insurance companies (160 before) and 17 life insurance companies, 286 pawnshops (287 before), 301 credit unions (303 before), 138 leasing companies (137 before), 977 financial companies (973 before), and 61 insurance brokers. On July 1, 2020, the National Bank became the regulator of insurance, leasing, financial companies, credit unions, pawnshops, and credit bureaus.
8.2 Central Bank policy rate
The National Bank of Ukraine (NBU) announced on September 9 that it had decided to hike its key policy rate by 0.5 pp to 8.5% at its board meeting that day. Tighter monetary policy aims to control inflation expectations and to return inflation to the target of 5% y/y in 2022.
In July, consumer inflation accelerated to 10.2% y/y as a result of fundamental and temporary factors. The global prices for energy resources and food remain high, and this contributed highly to inflation in Ukraine, the NBU notes.
In addition, the fundamental inflation pressure is maintained. The economic revival, coupled with reinforced migration pressure are stimulating the fast growth of wages. The fast increase of personal income is supporting the high domestic demand as proved by the accelerated growth of retail trade and high demand for consumer durables.
At the same time, the NBU states that the core inflation stabilized due to the correction of the price for sunflower oil and the national currency's appreciation. The regulator expects inflation to stay around 10-11% y/y in September-October, and it will go below 10% y/y by the end of the year. Next year, the downward trend will continue bringing the indicator to the target of 5% y/y.
IMF cooperation is a major assumption of the central bank’s forecast. Keeping up with the IMF program will help to get official financing from other sources, to lower interest rates for external borrowing, and to maintain the interest of international investors in UAH denominated assets.
The key risks to Ukraine’s economy include the significant reinforcement of COVID-related restrictions both in Ukraine and globally as well as a longer than expected spike of global inflation.
The regulator is ready to employ additional measures if the fundamental inflation pressure increases substantially while inflation expectations get worse.
53 UKRAINE Country Report October 2021 www.intellinews.com