National Bank of Ukraine (NBU) published the latest Macroeconomic and Monetary Review, which analyzed the economic results of April-May. It is noted that domestic investments, primarily in national currency, remain an important source of covering budget needs, given the “peak” of international aid receipts.
Inflation
In April, inflation remained at the level of March (3.2% y/y), which is the minimum value since October 2020. Lower raw food prices and stable inflation expectations contributed to this result. However, core inflation accelerated somewhat (up to 4.4% y/y) due to higher import prices and higher business costs. According to the NBU’s estimates, inflation increased slightly in May.
Business expectations and consumer sentiment
Business expectations and consumer sentiment worsened in May, mainly due to power restrictions and blackouts.
Labor market
The labor market recovery slowed in May, with labor demand easing but supply remaining tight. This continued to put downward pressure on wages, stimulating growth in household incomes.
Foreign trade
The foreign trade deficit narrowed in April thanks to a decrease in the spending of forced migrants abroad and a significant increase in corn exports, despite regular shelling of ports.
International reserves
International reserves remained at a comfortable level – 42.4 billion dollars. of the USA at the end of April and 39 billion dollars. USA at the end of May, despite the decrease in international aid.
National budget
The state budget deficit increased significantly in May due to large expenditures, but was financed by previously accumulated funds, including international aid. Domestic borrowing also remained an important source of financing. Tax revenues exceed the plan and are the main source of budget revenues.
Currency market
The situation on the foreign exchange market was under control thanks to the interventions of the NBU, despite the deterioration of the balance of demand and supply of the currency, which led to a weakening of the hryvnia exchange rate in May. Hryvnia instruments for savings (deposits and OVDP) remained popular.
Additionally:
Ukrainian pensioners are becoming increasingly valuable in the labor market due to labor shortages caused by war and migration. All-out war and an aging nation made older workers an important asset to the country’s postwar recovery.
