In Ukraine the rate of inflation is ten times higher than European. This year, according to forecasts of the Cabinet, for the first time since 2014 prices for the year will grow less than 10%. This year, the national Bank introduces a new monetary policy of inflation targeting. As a result, in the next year, according to the statements of the NBU, inflation will be at the level of six percent, and in 2019 will drop to five percent. The website “Today” figured out how prices have increased in Ukraine over the past few years and what to expect in the near future.
For several years the prices have doubled
Over the past five years prices in Ukraine increased almost twice, and the minimum wage over the same period is 2.7%. Before the crisis, in 2013, the inflation rate for the year was only 0.5%, while next year prices jumped by 24.9%. After the outbreak of hostilities Ukraine temporarily lost not only part of the territory, but the lion’s share of the industry. If this year, the head of the analytical Department of Concorde Capital, will manage to keep inflation below 10%, this will be a big achievement for Ukraine.
To learn more about how to change the level of inflation and the minimum wage in Ukraine over the past six years, after reviewing the infographic.
High inflation – it is normal for a developing economy, the Executive Director of the International Fund blazer Oleg Ustenko. In the advanced economies, prices are rising within an average of one to two percent per year. So, during the global crisis of 2008 in Ukraine the rate of inflation reached 22.3 per cent, and in the countries of the European Union, only 3.4%. At the end of last year in the EU rose by 1.66%, and in Ukraine – 12.4%.
“With 2014 cumulative consumer prices rose slightly higher than two times. If you look from the point of view of real income, they sharply declined. If you consider that the hryvnia during this period it has lost 2/3 of its value, the picture is quite deplorable,” – says Oleg Ustenko.
“With 2014 cumulative consumer prices rose slightly higher than two times. If you look from the point of view of real income, they sharply declined. If you consider that the hryvnia during this period it has lost 2/3 of its value, the picture is quite deplorable,” – says Oleg Ustenko.
According to the law, social standards, including minimum wages and pensions should grow by no less than the rate of inflation. However, in 2014 and 2015 the government has decided to freeze the indexation due to the difficult economic situation. The welfare of Ukrainians dropped sharply.
This year’s increase in the minimum wage two times allowed to “catch up” price increases over several years, however, Ukrainians on the “well-deserved” vacation pension and not counted.
If the rate of income growth ahead of inflation, said Oleksandr Parashchiy, rising prices are not terrible. “It’s not how prices are rising, and as the growing purchasing power of the population. In any inflation if the income of the population grows faster, inflation is not terrible. We know that the national Bank has stated that inflation will be 10% and this is the main reference point for all, including for the Bank, which provides loans and for the government. If we manage to maintain inflation below, this is positive,” – said the analyst.
The new policy of the national Bank: inflation plan to take control of
The Board of the National Bank adopted a decision in 2017 to move to a policy of inflation targeting, which means that the NBU will be responsible for the level of inflation in the country. To do this, the NBU can use the tools of monetary policy. For example, the national Bank may change interest interest rate depend on the interest rates on loans and deposits in commercial banks. The decrease in the discount rate leads to higher inflation and the fall – on the contrary.
“Since 2000 years, emerging markets are gradually moving towards the use of inflation targeting regime or a flexible option that is intended to achieve the inflation target in the medium term, two to three years,” – noted in the national Bank.
“Since 2000 years, emerging markets are gradually moving towards the use of inflation targeting regime or a flexible option that is intended to achieve the inflation target in the medium term, two to three years,” – noted in the national Bank.
This year , the national Bank announces the inflation rate is 8%, with possible deviations of +/- 2%, and in 2018, prices will rise by 6% (also with a deviation of +/- 2%), and in 2019, inflation will fall to 5% with a possible deviation of one percent.
“In contrast to the inflation forecast, which is a calculated value and can vary depending on the actual and expected trends in the economy, the goal iflation targeting is a constant value. It was on her achievement and directed monetary policy”, – noted in the Department.
Oleg Ustenko is sure to reduce the level of inflation for Ukraine – is quite real.
“It’s easy, and I hope that the national Bank, pursuing a policy of inflation targeting can lower inflation rate to the scheduled value. This is a must, even for a developing economy to double-digit inflation”, – the expert believes.
Head of analytical Department of Concorde Capital also believes that within three years, Ukraine can reach the level of the inflation rate of five percent.
By the way, in Ukraine the rate of inflation affects wage growth, which is included in the cost of goods, growth of tariffs for utilities, the devaluation of the hryvnia.
How to grow the incomes of Ukrainians this year
The minimum wage this year increased twice – up to 3200 hryvnia, to revise the minimum salary this year will no longer be. Most of the decline in the economy over the past few years has hurt pensioners. Currently, the minimum pension in Ukraine – 1247 UAH, this year it will increase by at least 90 UAH (may to 1312 hryvnia, in December – before 1373 UAH).
In addition, the government announced a possible “modernization” of pensions by an average of 300 hryvnia for five million Ukrainians.
Senior researcher of the Institute of demography and social studies Lydia Tkachenko is confident that revenues will indeed rise, but not for all pensioners. “We have a law written that will never be normal indexing. If the pensioner settlement of the insurance pension is below the subsistence level, he is therefore not entitled. And we have the vast majority of pensioners, about eight million people receive subsidies to the minimum wage, because pensions have not modernize, they will never have normal indexation”, – says scientist.
In addition, this year is expected the increase in cost of living. At the moment the minimum wage in Ukraine is UAH 1544, in may it will increase to 1624 hryvnia, and in December – to 1,700 hryvnia.
