Page 26 - UKRRptAug20

4.2​ Inflation
Annual inflation in June was 2.4%, slightly higher than 1.7% in May​. Last year, inflation was 4.1%, less than half the 9.8% recorded in 2018. President Zelenskiy told former central bank governor Yakiv Smoliy that he wants inflation this year to go up to 9-10%. Zelenskiy believes that by printing money, the government can cover the budget deficit and produce signs of economic growth by the Oct. 25 local elections.
4.2.1​ CPI dynamics
Ukraine’s consumer inflation accelerated to 2.4% y/y in June ​from 1.7% y/y in the prior month, the State Statistics Service reported on July 2. Consumer prices increased 0.2% m/m in June (vs. 0.3% m/m in May), mostly driven by food, alcohol and tobacco, as well as transportation prices.
Food prices rose 0.4% m/m in June (after climbing 1.2% m/m in May). In particular, prices jumped for fruits (8.4% m/m), bread (0.6% m/m) and butter (0.7% m/m). In addition, prices for alcohol and tobacco climbed 0.5% m/m. At the same time, prices for vegetables declined 4.7% m/m, and prices for both milk and sugar slid 1.3% m/m.
Prices for transportation jumped 1.2% m/m in June (vs. a 2.0% m/m decline in May), driven by increasing prices for fuel and lubricants and growing prices for railroad transportation.
Meanwhile, prices for clothing and footwear declined 2.8% m/m (after falling 1.4% m/m in May). Prices for housing and utilities continued to slide, losing 0.4% m/m (vs. a 2.8% m/m decline in May) due to a plunge in natural gas prices by 4.3% m/m.
Annual consumer inflation accelerated in the absence of usual disinflation in June. Meanwhile, we believe that June’s inflation was supply-driven rather than resulting from increased consumer activity. In particular, food suppliers have been hit by chain disruptions, which emerged as a result of quarantine/lockdown restrictions in Mach-May.
26​ UKRAINE Country Report​ August 2020 ​ ​www.intellinews.com