Ukraine central bank predicts inflation to rise in first months of 2025

Ukraine’s central bank expects inflation to continue rising in early 2025 due to lower harvests, business energy costs, labor expenses, and hryvnia exchange rate weakening, the National Bank of Ukraine (NBU) reports.

“Inflation will return to a sustainable downward trajectory in the second half of 2025 and move toward the NBU’s 5% target on the policy horizon,” the central bank reported.

According to the NBU, several factors will contribute to reducing inflation, including the bank’s interest rate and exchange rate policies, improved harvests, better energy sector conditions, reduced fiscal deficit, and moderate external price pressures.

The announcement comes after consumer prices in Ukraine rose by 1.4% month-over-month in December 2024, bringing annual inflation to 12% for the year, the NBU reports.

The ongoing Russian war against Ukraine has had profound effects on Ukraine’s economy, particularly concerning inflation. Since the onset of the war in February 2022, inflation rates have fluctuated significantly, influenced by various factors directly related to the war.

In February 2022, prior to the full-scale invasion, Ukraine was experiencing a consumer inflation rate of approximately 10% year-on-year (y-o-y). However, as the war escalated, inflation surged dramatically, peaking at 26.6% y-o-y in October 2022.

This spike was primarily due to the destruction of production facilities, disruptions in supply chains, and increased production costs stemming from the war.

As of November 2024, inflation had risen again to 11.2%, up from 9.7% in October 2024. This increase was attributed to continued strikes from Russia affecting essential services and commodities, with notable price rises in housing and utilities (18.7%) and food (14.3%).

The inflation rate is expected to reach around 12% by early 2025.

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