Ukrainian National Bank forecasts 12% consumer inflation level to end of 2016

Ukrainian National Bank forecasts 12% consumer inflation level to end of 2016National Bank of Ukraine keeps its consumer inflation forecast at the level of 12% at the end of 2016 and 8% for the end of 2017. It is reported by the press service of the regulator.

As the report says, such inflation forecasts correspond to the objectives of monetary policy.

According to NBU, in the second half of the year, the inflation rate will draw closer to the target level. The main reason for this is the increase in tariffs for public utilities.

At the same time, inflation will slow down faster than in previous forecasts.

Inflation of the other components of the consumer basket shall also slow down. This is due to supply factors, a decrease in imported inflation in a less volatile exchange rate and the improvement in inflation expectations, says the report.

Forecast of economic development remains unchanged: the real GDP will grow by 1.1% in 2016, by 3% in 2017, and its growth will accelerate by 4% in 2018.

Investment activity will recover rapidly in comparison with the previous forecast. The need to reorient towards European markets will stimulate exporters to invest, and the best terms in trade will enable financial capacity for this. At the same time, the increase in world energy prices with economically justified tariffs for heat and natural gas will encourage the introduction of energy saving technologies.

The forecast of the current account deficit decreased from $2.3 billion in 2016 to $1.8 billion. Thanks to improved terms of trade and the expected increase in grain crop, the decrease of export volumes shall decline to 2% in the current year.

Significant recovery of exports to restrain the introduction of Russia from July 1, additional restrictions on the transit of goods to Kazakhstan and Kyrgyzstan. However, in view of the declining trend in recent years, the volume of trade with Russia and other CIS countries, the effect of these restrictions will be much lower than the previous. At the same time, the volume of imports of natural gas will decrease and the volume of private transfers to Ukraine will increase. Significant expansion of the current account deficit is also not expected in the coming years.

A key assumption of this most probable forecast scenario is further cooperation with IMF, although the schedule of official financing revenues has already been postponed to a later date once.

The inflation in June slowed down to 6.9%, according to NBU.

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