What will happen to prices in Ukraine in 2024: forecast of the Ministry of Economy

Consumer prices in Ukraine grew by only 5.1% in 2023. In the coming months of 2024, in the absence of force majeure, price dynamics will remain in the established pattern of low "sluggish" inflation, RBC-Ukraine reports, citing the Ministry of Economy's 2023 inflation review.

"The current inflationary trend and the factors that shape it indicate the absence of strong prerequisites for a reduction in supply or a significant increase in demand, so the achieved level of general price equilibrium will continue in early 2024, taking into account seasonal fluctuations in the food market," the review says.

Reasons for the decline in inflation

According to the Ministry of Economy, the downward trend in inflation was the result of a combination of several powerful factors.

The key factor was the high adaptability of business and, accordingly, the excess supply of goods, primarily in the agricultural sector, over demand in the domestic market, which continued to be limited by the war.

In particular, despite the significant losses incurred by the agricultural sector as a result of the war (the World Bank estimates that direct losses in agriculture amounted to $10 billion), its production potential still exceeds the needs of the domestic market.

According to the Ministry of Economy, in the face of complicated maritime logistics and restrictions on the export of Ukrainian products by a number of European countries, this has led to a glut in the domestic market and, accordingly, a 2.8% drop in food prices in the second half of the year.

The ministry expects that export growth in 2024 will reduce the pressure of oversupply of some products on the domestic market, "and a further increase in household consumption will allow producers to partially compensate for the losses and high costs caused by the war through prices."

Inflation forecasts

In January, the NBU improved its inflation forecast. The NBU predicts that consumer prices will grow by 8.6% in 2024.

Author: Oleksandr Bilous