The National Bank has worsened its inflation forecast

The National Bank has worsened its inflation forecast

The National Bank revised the economic forecast for the worse, explained the rise in inflation, and predicted potential risks associated with the global trade war.

Andriy Pyshnyi, the head of the National Bank of Ukraine, announced a downgrade of the NBU’s GDP growth forecast for the current year to 3.1% (previously it was 3.6%).

The increase in inflation in Ukraine in March to 14.6% year-on-year is due to the consequences of last year’s poor harvest, further rising prices of excisable goods, as well as increased enterprise costs for energy and labor.

However, he expects a decrease in inflation in the future, including due to the current decline in oil prices "because of trade confrontations in the world."

Pyshnyi also noted that military risks remain key for the Ukrainian economy. The general list of risks is as follows:

1. The emergence of additional budgetary needs, primarily for maintaining defense capability.

2. Further damage to infrastructure, especially energy, which will limit economic activity and affect prices from the cost side of products.

3. Deepening negative migration trends and expanding the labor shortage in the domestic labor market, which will increasingly constrain the long-term potential of the economy.

The head of the National Bank acknowledged that the trade war in the world could adversely affect Ukraine’s external financing.

"These risks are heightened against the background of growing geopolitical uncertainty and the intensification of deglobalization, particularly due to a sharp escalation of trade confrontations in the world. If these processes are protracted, have a tendency to further intensify, and are accompanied by rapid political polarization of countries, the external environment may become less favorable than the current macro forecast predicts. This could lead to a more significant and prolonged slowdown of the global economy than expected, a fall in external demand, as well as changes in the rhythm of international financing," said Pyshnyi.