National Bank of Ukraine described the reasons why in 2009, despite significant amounts of the fall of the economy, failed to reach the target of inflation below 10%.

“This was the result of stimulating fiscal policy in the second half of 2009 and the transfer effect of the devaluation of the hryvnia at prices that occurred in late 2008 and throughout 2009 (except for the IV quarter of 2009) “- stated in a research note, which was announced on the website of the National Bank.

proof of this statement in NBU called the fact that core inflation over the year exceeded the annual growth rate of consumer price index, though the figures in the annual measurement decreased from 21,3% to 14,9%.

An additional factor that prevented decline of inflation to the full, had high inflation expectations that were generated by a high degree of uncertainty in politics and economics, primarily associated with a significant budget deficit and the lack of sources of its coverage, as well as the slow pace of rebuilding confidence the banking system.

Nevertheless, the National Bank pointed out that throughout 2009 there was persistent downward trend in inflation (from 22,3% to 12,3%). The main factors of this process have reduced prices on world commodity markets, contraction of the external and domestic demand, which formed a significant negative gap of GDP at the beginning of the year.

Additional factors influencing inflation were high yields in 2009 and administrative regulation of individual prices and tariffs for services, which is inconsistent with economic feasibility, as well as with the Government”s commitment regarding their establishment at the appropriate level. As a result of administrative backlash accumulated structural imbalances, which formed the pending inflation in the economy.

The National Bank also noted that the dynamics of monetary aggregates over the past year (the money supply for the year decreased by 5,5%) and state budget expenditures in the second half of 2009 exerted a restraining influence on inflation.

According to Goskomstat, the inflation in Ukraine in 2009 amounted to 12,3% (December 2009 to December 2008).

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