Ukrainian consumers felt the impact of high inflation in 2021 as prices on basic goods and utilities kept growing. The annual inflation rate last year grew to 10% for the first time since 2018. The growth of consumer prices also accelerated – from 5% in 2020 to 10% in 2021, according to the State Statistics Service.
Price increases were seen in 2021 across many sectors, including gas, food and transport. Gas tariffs increased by 66% last year and electricity tariffs went up by 34%. Grocery shopping also became more expansive as sugar prices rose by 61.5%, sunflower oil prices – by 57.7%, and eggs – by 47%.
The cost of transport and education also went up – by 15% and 10% respectively. The average check in Kyiv's cafes increased by 21% last year, and the cost of a taxi – by almost 40%.
Changes in consumer prices in Ukraine in 2021:
Bread – up by 15.8%
Alcoholic beverages – up by 9.8%
Meat – up by 9.3%
Fish – up by 7.1%
Healthcare – up by 6.6%
Restaurants and hotels – up by 6.1%
One of the reasons for the spike in prices was the global supply chain disruption triggered by the pandemic. For months shipping containers loaded with goods waited in ports to be unloaded, causing shortages in supermarkets and changes in consumer behavior globally.
The rising inflation is not unique to Ukraine. As energy and food prices soar amid the global economic crisis triggered by the COVID-19 pandemic, the inflation in Europe reached a record 5% in December, according to Eurostat.
In the U.S., the inflation rate rose to 6.8% over the last year to its highest point since 1982, according to the Bureau of Labor Statistics. Economists say that inflation will start to fall in the coming months, although their confidence has decreased amid the outbreak of the coronavirus’s contagious Omicron strain.
Over 2022 Ukraine's National Bank wants to bring the inflation down to the promised 5%. Local experts are not so optimistic.
"Ukraine could return to 5% inflation only in the first quarter of 2023," according to Vitaliy Vavryshchuk, head of the macroeconomic research department at the ICU financial group. In 2022, the inflation rate could fall to 7.2%, he said.
Other forecasts are similar: Head of the analytical department at Alfa-Bank Oleksiy Blinov predicts that the average annual inflation will exceed 8% next year, while banks and businesses expect that it will stay at 7.5-8% at the end of 2022, according to the NBU deputy chairman Serhiy Nikolaychuk.
To slow down inflation in Ukraine the NBU raised its policy interest rate five times last year. In December it reached 9%, a maximum in almost two years. According to the NBU, this rate was motivated by the rising inflation and the threat of Russia'a military invasion.
Around the world many central banks have already started normalizing monetary policy, according to Morgan Stanley.
“But we do not think banks will abruptly set rates back to neutral, let alone into a restrictive stance,” said Morgan Stanley's Chief Global Economist Seth Carpenter.
