Page 14 - Ukraine OUTLOOK 2025

Food prices dominate inflation drivers: Food prices accounted for nearly half of the annual consumer price index (CPI) increase. A summer drought, which had a more significant impact on agricultural yields than anticipated, continues to reverberate through the economy. In November, vegetable prices surged 63% y/y, while butter prices rose 31% and fruit prices climbed by 25%.
“There are also several other important accompanying factors that drive inflation higher,” ICU analysts noted, pointing to a 64% hike in electricity tariffs in June, which contributed nearly 15% to the CPI tally. The pass-through effects of the hryvnia’s depreciation between January and July further added to inflationary pressures.
Broader price stability: Despite the sharp rise in headline inflation, the impact has been uneven across the consumer basket. Prices for clothing and footwear fell 4% y/y in November, while home appliance prices remained steady compared to last year. Motor fuel prices saw a modest 1% uptick over the same period.
“This indicates that an upsurge in inflation is primarily driven by temporary factors that are set to weaken next year,” analysts said, adding that the inflationary pressures are concentrated in specific categories such as food, alcohol, tobacco and electricity.
Outlook remains optimistic: While inflation is expected to remain in double digits throughout winter and spring, experts predict a gradual slowdown, with the annual CPI likely to decelerate to around 7% by the end of 2025.
“Despite recent significant acceleration in headline CPI, we don’t think that inflation risks are severe and of a long-term nature,” analysts commented, citing the stability of non-food categories as a reassuring sign.
The short-term inflationary surge underscores the vulnerabilities of Ukraine’s economy to supply shocks, but the temporary nature of the contributing factors offers hope for a return to more stable price dynamics in the medium term.
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