Prices in Ukraine not falling due to low competition on markets and rising wages - NBU

Prices in Ukraine not falling due to low competition on markets and rising wages - NBU

Ukrinform
The population in Ukraine does not feel price reductions for many reasons, in particular, due to inertia in pricing, low competition on individual markets, which helps businesses keep prices high even amid lower costs, and rising wages in Ukraine, the press service of the National Bank of Ukraine (NBU) has reported.

"Despite the strengthening of the hryvnia exchange rate, the population does not feel price reductions. There are many explanations for that. Partially, inertia in pricing. Partially, low competition on individual markets, which helps businesses keep prices high even amid lower costs. Partially, the influence of other factors that, in the same way as the exchange rate, affect the cost of production, in particular, the wage increase, which has been observed in Ukraine for a long time. Partially, the influence of increasing demand as a result of the growing income of Ukrainians," the NBU's press service reported on its Facebook page, following a joint meeting of Ukrainian President Volodymyr Zelensky, the NBU leadership headed by Yakiv Smolii, Prime Minister Oleksiy Honcharuk and the team of the government's bloc on financial and economic development.

However, the strengthening of the hryvnia exchange rate is a sign of macroeconomic stability and a consequence of the emergence of new fundamental factors. First, due to the deepening of Ukraine's integration into the world capital markets, a steady inflow of non-resident funds into the national debt was recorded. Secondly, grain yields in Ukraine have grown at a record high in Ukraine. This is no longer a situational phenomenon, but the new reality of the currency market.

According to the report, the participants in the meeting discussed the issues of maintaining financial stability and strengthening the coordination of monetary and fiscal policies.

Also, one of the topics of discussion was increasing the access of Ukrainians and businesses to cheap credit resources. This requires the joint efforts of various branches of government. The NBU's contribution is to reduce inflation, gradually soften monetary policy and create the conditions for clearing the bank balances of bad assets.

According to the NBU, the discount rate will decrease to 9% by the end of next year and to 8% by the end of 2021. At the same time, structural reforms, such as the launch of the land market and the completion of judicial reform, will help mitigate credit risks, which banks also envisage in interest rates, the NBU said.

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