National Bank describes the effect of exchange rate fluctuations on inflation in Ukraine
According to the NBU inflation report, the growth of the national currency does not affect inflation as much as weakening the hryvnia. The National Bank made such findings based on the observation of inflation during the period January 2014 to December 2019.
Over a specified period of time, the hryvnia both fell and rose (growth occurred in 2019), which allowed us to determine patterns in the effect of inflation. The devaluation of one percent leads to an average increase of 0.22% in consumer prices. But as a result of the revaluation of one percent, prices are reduced by 0.08%. After 6 months the effect is almost entirely noticeable.
During a significant increase in the exchange rate in Ukraine, the impact of such an increase on inflation can be very high. Thus, according to NBU calculations, in 2015, every percentage of devaluation of hryvnia increased inflation by 0.45–0.5%.
It is worth noting that in April 2020, as a month earlier, inflation in Ukraine rose by 0.8%, and yearly it slowed from 2.3% to 2.1%. The prices of alcoholic beverages and tobacco products increased by 0.9%, for clothes and shoes – 0.4%. Housing, water, electricity, gas and other types of fuels declined by 3.2%, with gas falling 11.9%, while hot water and heating dropping by 5.3%.
The price of housewives and home appliances increased by 0.4%, the price of healthcare increased by 2.1%, the price of transportation declined by 1.3%, the prices for communication did not change, 0.4% for entertainment and culture. Declined and prices for education declined. , Restaurants and hotels remained unchanged.
Summary PAYSPACE magazine
Recall, according to the National Bank of Ukraine annual report from 2015 to 2019, the share of cash relative to gross domestic product (GDP) decreased from 17.8% to 9.7% as of the beginning of 2020.
The decrease in cash share in the NBU is explained by two factors: the increasing popularity of cashless transactions and the increase in the number of cashless payments in Ukraine. Most commonly, Ukrainians use card payments in retail chains, this method of calculation is used by 51.2% of the population.
Read: NBU recommends that banks reduce fees for cashless payments