Page 10 - bne OUTLOOK 2022 Ukraine

• Inflation and monetary policy rates
Inflation has been the main macroeconomic problem. After crushing inflation in 2019, which fell to a post-Soviet all time low of below 2% in May 2020 inflation roared back in 2021 to peak at 11% in September before starting to fall as a series of aggressive rate hikes began to take effect.
The official outlook for inflation is to end 10.6% in 2021 before falling to 6.5% in 2022.
The IMF has also upped its forecast for the full-year average inflation number from 7.9% to 9.5% in 2021 and from 6.8% to 7.1% in 2022. Ukraine is expected to finish 2021 with the inflation rate at 10.2%, and 6% in 2022.
The EBRD stated that it expects inflation in Ukraine to decline at the end of 2022, falling back to the NBU’s target of 4-6%.
The National Bank of Ukraine (NBU) was the first central bank in the region to reverse several years of loosening and start hiking rates in March and increasing rates at every meeting after that except in June: March (50bp), April (100bp), flat in June, July (100bp), September (50bp), December (50bp).
In 2022 the rating of inflation is expected to keep falling as supply chains are repaired and food prices start to normalise. The fall in inflation in 2021 was particularly helped by a bumper crop that brought food prices down and another good crop in 2022 will help do the same.
Analysts believe inflation peaked in October 2021, but core inflation has yet to peak. Overall, in 2021 JP Morgan expects inflation at 9.4% and 8.3% in 2022.
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