Ukraine’s annual inflation rate has grown to 10.2% in July, exceeding 10% for the first time since 2018, the National Bank of Ukraine reported.
Ukrainian consumers are feeling the impact of rising prices on basic goods and utilities. Sugar prices rose by 83.5% and sunflower oil prices by 79%, while gas tariffs increased by 164.5% and electricity tariffs by 36.6%.
The rising inflation was partly triggered by the economic crisis accompanying the COVID-19 epidemic, according to experts.
The National Bank of Ukraine (NBU) expects inflation to hit 11% and wants to bring it back down to 5% by 2022.
Before the COVID-19 crisis began, Ukraine has been successful at controlling inflation. In December 2019, inflation rate was brought down to its six-year nadir of 4.1%.
On June 23, the NBU raised its policy interest rate from 7.5% to 8% to slow down inflation in the country. The key policy rate determines all other interest rates in Ukraine.
The slight increase aims to slow down inflation, which accelerated to 9.5% in June, exceeding the central bank’s previous forecast of 9.2%. Overall, the NBU forecasted a 9.6% inflation for 2021. Rapidly rising prices may threaten progress made in increasing the real wages of Ukrainians.
If inflation begins to outstrip nominal wages, Ukrainians will find themselves with greater living costs and a reduced ability to save money.
According to a report published by the State Statistics Service on Aug. 6, 67% of Ukrainians already consider themselves to be poor.
Meanwhile, only 1% of Ukrainians consider themselves to be part of a middle class in Ukraine, with a majority of respondents stating that they do not believe that their financial situation will improve.
Rising food prices and reduced production of household goods is a global trend. The Food and Agriculture Organization of the United Nations (FAO) has recently noted that its food price index was much higher than usual.
