Photo: press service of the NBU the Deceleration of inflation contributed to the strengthening of the hryvnia

A major factor in slowing growth in consumer prices was the strengthening of the hryvnia, the national Bank reported.

The strengthening of the hryvnia was a key factor behind the significant slowdown of inflation in 2019. About it reports a press-service of the National Bank.

The NBU recognizes that inflation was below forecast.So, in the Inflation reports for the 2019 national Bank predicted price growth at 6.3% at year-end.

“Consumer inflation has slowed from 9.8% in 2018 and 4.1% in 2019, according to the Committee. A key factor in a significant deceleration of growth in consumer prices was the strengthening of the exchange rate of the hryvnia,” – said in the message.

The strengthening of the national currency, says the NBU, was given the high investor interest in hryvnia financial instruments, given their attractive yield amid an extended period of macroeconomic stability and overall growth performance the Ukrainian economy.

The reduction in inflationary pressures was supported by the General decline in world energy prices, which Ukraine imports and easing the pressure on the supply side of food. At the same time gradually improved inflation expectations, financial analysts, business and banks.

Together, these factors outweighed the effect of faster-than-expected growth in consumer demand and wages. The slowdown was more significant than anticipated in the forecasts of the NBU, which were published in the Inflation reports for 2019 (the 6.3% at the end of the year), as well as in evaluations of other expert organizations.

Underlying inflation by the end of 2019 slowed to 3.9% compared to 8.7% in 2018.

Decrease in prices for manufactured goods, which are mainly represented by imported products or have a high share of imports in costs. In particular, during the year, cheaper cars, clothes and shoes, household appliances and electronics. Also, due to the exchange rate factor is insignificant was the increase in prices for furniture, goods for personal care, household and pharmaceutical products. Moderately went up most foods with highly processed pasta and confectionery, meat and dairy products, tea, juices. And the price of rice, olive and sunflower oil was even lower than in 2018 because a significant portion of these products is significantly dependent on imports and prices in foreign markets.

At the same time, a sufficiently high growth of cost of services, primarily due to continuing strong consumer demand and rising business costs, particularly labor costs. The most significantly increased financial and notary services, cable television, education, mobile communications, salons, hotels, medical institutions. At the same time, the strengthening of the hryvnia contributed to the lower growth rate of prices for services that are closely bound to the course: rental housing, cinemas and Internet, restaurants and cafes, offices and tourism services.

The rising prices of raw food in 2019 was moderate and amounted to 3.9% (last year – 3.3%). Thanks to the good harvest figures decreased the price of most vegetables (except potatoes): cabbage, carrots, onions, tomatoes, eggplant, peppers, beets. Insignificantly increased the prices of beef and pork, and the chicken was even cheaper than a year ago due to excess production over demand. High growth of prices only for some products, in particular for apples, potatoes and buckwheat, because of the smaller crop this year.

The growth of prices and tariffs regulated by administrative, decreased from 18.0% in 2018 to 8.6%. Due to lower prices in European markets have decreased the price of natural gas for the population. Moderate growth of prices for alcoholic drinks, cold water and Sewerage, and the cost of electricity for the year has not changed. At the same time a rather high growth of prices of tobacco products due to the further reduction of excise duties on these goods to the European level.

Fuel prices declined by 8.2% (in 2018, they showed a 9.1% rise) due to the stronger exchange rate of the hryvnia and the General decline in world energy prices.

We will remind, the Ministry expects to strengthen the hryvnia in 2020. The Minister said that the course will be strengthened with the development of economy and the favourable situation on world markets.

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