08/23/08

Ukraine Economy

Ukraine's High Inflation Eases in July - Further Relief Seen

Condensed by Nova Mova from Internet news sources.

According to Ukrainian Prime Minister Julia Tymoshenko, prices in Ukraine fell by 0.5 percent month-on-month in July following a modest rise of 0.8 percent in June, and this trend could continue with further price deflation in August.
 
"July was the first month when we have seen deflation, as established by the State Statistics Committee," Tymoshenko said during a cabinet meeting. "All the anti-inflation measures we adopted are now producing results.”
 
Tymoshenko has been predicting that prices would fall during the summer months and has attributed these to government policies; however, 2008’s harvest has been better than expected, and energy prices have been lower, both of which have served to help lower prices. Although touting her government’s role, Tymoshenko did acknowledge those external factors.
 
"All the conditions are present for deflation in the coming months,” she said.  “Global oil prices have started to fall and there are no reasons to have inflation in the country.”
 
Her comments also included threats of actions against the local administrations of regions in which inflation is still occurring.
 
Ukraine’s severe inflation of up to 30 percent in recent months is attributed to high food prices caused by last year’s poor harvest, as well as to overly generous government spending. But this year’s harvest is expected to yield 43 million tonnes of grain (compared to only 29 million tonnes last year), and the central bank tightened the monetary policy in May, which has also helped. The hryvnia had been tied to the U.S. dollar at a rate of between 5.00-5.06 hrv to US$1.00. The hryvina traded at around 4.65 last week.
 
The government’s most recently announced target for overall annual inflation for 2008 is 15.9 percent, which is still seen by many analysts as overly optimistic, despite the recent slowdown in inflation and the deflation in July. Most analysts expect inflation for the year to be about 21.6 percent.

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