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NBU raised the inflation forecast for 2017

НБУ повысил прогноз инфляции на 2017 годThe Bank also retained the discount rate at 14%.

The national Bank of Ukraine (NBU) raised its inflation forecast for 2017 to 9.1% from 8%. The forecast has been increased primarily due to the increase in minimum wage from the beginning of the year from 1 600 to 3 200 hryvnia per month, the report said the regulator on Thursday, January 26.

“This decision of the government (raising the minimum wage – ed.) will affect inflation both directly through the increase in consumer demand of the population, mainly on industrial goods, and the cost of production, and indirectly on the inflation expectations of Ukrainians,” – says the NBU.

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The national Bank also increased the forecast of growth of gross domestic product (GDP) in 2017 to 2.8% from 2.5% and reduced in 2018 to 3% from 3.5%. According to NBU estimates, economic growth in 2016 was 1.8%.

According to the NBU, the economy will gradually approach its potential level: aggregate demand will continue to restrain inflation, although this effect is significantly weakened compared with previous years.

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In addition, the regulator expects the growth of foreign exchange reserves by the end of 2017 to $21.3 billion by the end of 2018 to $27.1 billion, expecting to receive the planned tranches from the IMF.

The NBU also noted that to compensate for inflation risks and achieve goals for inflation in 2017-2018 saved discount rate at level of 14%.

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