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Ukrainian economy under pressure due to inflation, lagging reforms, and threat of border conflict

Inflation in Ukraine climbed to 8,5 % year-on-year in March compared to 6,1 % in January 2021. The growing inflation is mainly due to rise in global food and energy prices. Ukraine is expected to recover fast from last year´s Covid-19 hit to the economy, but rising prices may pose a risk to its recovery prospects.


The Ukrainian central bank is expected to hike interest rates to 7 % from the current 6,5 % in its meeting this week.

The Ukrainian economy is also under pressure due to lagging reforms in the economy, which are holding up further loans from the IMF under the parties´ current 5 billion USD loan program. Furthermore, growing border tensions in the Donbass area are currently suppressing investors´ appetites for Ukrainian bonds and other investments.

Oleksandr Pecherytsyn, Chief Economist of Credit Agricole in Ukraine comments: “A sharp (rate) increase could negatively affect the economic environment which is already under the negative impact of quarantine restrictions. Especially since the program with the IMF is still under discussion”.


14.04.21


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