Why are prices increasing in Ukraine, and what can we anticipate next?

During April and May, consumer prices in Ukraine continued their ascent. According to the NBU, inflation in May reached a peak that was higher than expected; yearly inflation surpassed 15% in May. The rise in raw product prices intensified due to the lingering effects of last year’s poor harvests, spring frosts, and seasonal variations in demand for certain foods and goods. Underlying inflationary pressure was driven by steady consumer demand and additional hikes in business production costs.

Nevertheless, the NBU predicts a future slowdown in price growth. This will be aided by the arrival of new harvests, a better energy sector situation than last year, and declining global oil prices.

“At the same time, the pace of inflation reduction will significantly depend on the effects of spring frosts and summer weather on the supply and prices of agricultural goods,” added the NBU chairman.

Furthermore, NBU Deputy Chairman Serhiy Nikolaychuk indicated that if crop failures occur again this year, farmers might not be able to increase prices further, as imports from neighboring countries would counteract this. Indeed, food market prices in Ukraine “are close to, and in some cases exceed, prices in neighboring countries.”