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Some inflation risks decrease in short term from July 21, but remain significant in long term – NBU deputy head
KYIV. Sept 8 (Interfax-Ukraine) – Since the previous decision of the National Bank of Ukraine (NBU) on monetary policy on July 21, part of inflationary risks have decreased in the short term, but they remain significant in the long term, NBU Deputy Governor Serhiy Nikolaychuk said during a press conference of the regulator on Thursday.
Migration rates remain higher than the NBU anticipated, with the potential for a shrinking workforce and a long-term negative impact on the labor market and economic growth after the war.
In addition, the lack of progress in the return of excise tax on fuel and additional taxation of imports reduce price pressure in the short term, but in the future, insufficient measures to restrict imports and balance public finances create risks for fiscal sustainability, maintaining control over inflationary processes and macro-financial stability.
According to the report, the opening of Black Sea ports for grain exports took place earlier than expected by the National Bank, which increases the volume of export earnings, while the stability of supplies along the sea route remains vulnerable.
In addition, the implementation of new initiatives for financial support from the United States will increase the volume of Ukraine’s international reserves in 2022 above the forecast, which will positively affect the stability of the economy and expectations. At the same time, the prospects for non-equity financing of the budget deficit in 2023 are mostly uncertain.
The press service noted that one of the risks is the persistence of low rates on government bonds at primary auctions, in particular, in comparison with the secondary market, which significantly limits the volume of government fundraising. It also hinders monetary transmission and an increase in the attractiveness of hryvnia assets, which raises the sensitivity of the foreign exchange market to situational factors and risks to financial stability in the longer term.
