Ukraine’s Inflation to Accelerate Through 2013, UkrSibbank Says

Ukrainian inflation, which will probably be the slowest since 2002 this year, may accelerate through 2013 as the hryvnia declines and state spending rises before elections, BNP Paribas’s Ukrainian unit UkrSibbank said.

Consumer prices may increase 9.9 percent in 2012 and 15 percent in 2013, Alexander Belozyorov, head of macro and fixed- income research at UkrSibbank in Kiev, said today in an e-mailed note. Growth will probably slow to less than 5 percent this year from 9.1 percent in 2010, he said.

“Inflation will significantly accelerate next year, because of pre-election budgetary spending and the expected ‘quantitative easing’ by the central bank,” Belozyorov said. A hryvnia “devaluation is getting very likely in 2013 as it would substantially improve profit margins of exporting industries.”

The inflation rate was 5.2 percent in November, its lowest level since May 2003 as a record grain harvest helped ease food costs. Prime Minister Mykola Azarov’s government, which faces a parliamentary vote in October, is targeting a rate of less than 8 percent in 2012. His party’s support fell to 17.8 percent this month, compared with 18.8 percent for former Premier Yulia Tymoshenko’s party, a poll by the Democratic Initiatives Foundation in Kiev showed.

In 2012, Ukrainian government policy “will likely be focused on securing the victory of the ruling party at the parliamentary elections,” said Belozyorov. After the vote, the authorities “will have much more leeway in managing the exchange rate and, most likely, will allow the hryvnia to devalue with the aim of increasing exporters’ profitability and saving the central bank’s reserves.”

The hryvnia may decline to 8.40 per dollar by the end of 2012 and to 9.80 by the end of 2013, according to the note.

To contact the reporter on this story: Daryna Krasnolutska in Kiev at

To contact the editor responsible for this story: Balazs Penz at

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