Inflation in March exceeded forecasts due to a jump in fuel prices - NBU

In March, inflation continued to rise, exceeding forecasts. The main reason is a sharp jump in fuel prices due to the war in the Middle East, the NBU reported in its macroeconomic and monetary review for April, writes UNN.

In Ukraine, due to the difficult situation in the energy sector and the fuel market, inflation also accelerated (to 7.6% in February) after a long period of decline. According to NBU estimates, it increased slightly in March.

Exchange rate

"Due to increased geopolitical uncertainty, net demand for foreign currency increased in both the non-cash and cash segments. As a result, the NBU increased its sale of currency in the interbank market to $4.8 billion (according to data on the date of the agreement)," the NBU noted.

In March, the dollar strengthened against most currencies, including the hryvnia, amid global turbulence. At the same time, the hryvnia slightly strengthened against the euro.

"The average official exchange rate of the hryvnia against the dollar weakened by 1.6%, but slightly strengthened against the euro (by 0.6%). The difference between the cash and official exchange rates for the sale of the dollar and the euro remained minimal (0.6% and 0.7% respectively)," the review states.

To maintain the stability of the foreign exchange market, control inflationary processes and expectations, the NBU kept the key policy rate at 15% in March.

Business and salaries

As noted by the NBU, business expectations and a number of economic activity indicators improved in March due to some stabilization of the situation in the energy sector.

"The number of job seekers increased, but businesses continued to experience a shortage of personnel, especially qualified ones. This, along with increased payments in the public sector, led to high rates of salary growth year-on-year," the review states.

Balance of payments and budget deficit

In February, the current account deficit of the balance of payments, as indicated, significantly expanded - to $4.7 billion. The reason is the increase in goods imports and the reduction in grant receipts. This led to a decrease in international reserves, which, however, remained at a high level.

The state budget deficit (excluding grants) in March decreased compared to February primarily due to an increase in own revenues, while for the quarter as a whole – primarily due to more restrained expenditures amid lower volumes of international assistance ($5.5 billion in January–March).