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preferential lending within the framework of the eOselya program," the regulator explained. It is reported that in August, five banks provided mortgage loans for purchasing housing, mainly on the secondary real estate market. The weighted average effective mortgage rate in August increased to 8% (7.9% in July). On a regional basis in August, the most mortgage loans were issued in Kyiv and the Kyiv region – 270 contracts for a total of ₴443.9M (49.3% of the total), Chernihiv (41 contracts for ₴52.5M), Vinnytsia (35 for ₴51.1M) and Rivne (40 for ₴ 50.9M) regions," the regulator clarified.
8.2 Central Bank policy rate
The National Bank of Ukraine (NBU) cut its key policy rate again from 20% to 16% per annum, effective from October 27, as Ukraine’s economy continues to improve, but the outlook for the economy is threatened by mounting funding restrictions by the international donors.
The cut to interest rates comes as inflation continues to fall and the economy starts to pick up, but international funding has also slowed in recent months leading to the central bank burning through $2bn. A growing trade deficit is also undermining the currency and the current good news could prove temporary. (chart) The NBU said that several factors had influenced its decision to lower rates. First, there are no signs of deterioration in the balance of risks, indicating a stable economic environment. Secondly, market participants have successfully adapted to the new currency regime.
The central bank also flagged investors to more rate cuts in the future provided macroeconomic conditions allow.
Consumer inflation in Ukraine slowed to 8.6% in August thanks to a larger than expected supply of new-harvest vegetables and fruits. The NBU has not provided figures for September’s inflation, but according to the published schedule, inflation slowed to approximately 7%. According to the NBU, the slowdown in inflation will also continue in September, according to their October Macroeconomic and Monetary Survey.
The improving situation with inflation is also reflected in the recovery of economic growth, which has gone back into the black despite the war with Russia. In September, Ukraine's economy grew by more than 9%, the Ministry of Economy recently reported. Growth over the first nine months of this year is estimated at 5.3% compared to the corresponding period last year.
But the NBU also said that a return to a policy of fiscal loosening in 2024 will only be possible once there is a significant reduction in the exchange rate volatility as well as lower inflation. As part of this plan, the regulator intends to lower the discount rate to 15% at the next meeting in December and maintain this rate throughout the entirety of 2024, the regulator said.
74 UKRAINE Country Report November 2023 www.intellinews.com