OREANDA-NEWS. Round table dedicated to updated macroeconomic forecasts with participation of external experts took place at the National Bank of Ukraine.   During the event, NBU Deputy Governor Mr Dmytro Solohub and Director of the Monetary Policy and Economic Analysis Department Mr Serhii Nikolaichuk discussed with the participants prospects of the Ukrainian economy in 2016-2017 described in new quarterly Inflation Report for July 2016.

NBU retained forecast regarding the real GDP growth at level of 1.1% in 2016 and 3.0% in 2017 as well as inflation forecast at level of 12% by end-2016 and 8% by end-2017 despite the range of assumptions compared to April. Assumptions regarding situation in the east of the country, deposits inflow in the national currency to banks and revival of bank lending activity remained relevant. At the same time, theNBU expects that commodity prices will be higher than had been envisaged in the previous forecast. Along with that, the reflection of higher tariffs for public utilities in statistics will result in bringing the inflation back to target level of 12% in the second half of 2016.

Also, the updated forecast is based on more optimistic assumptions regarding grain harvest in 2016-2017. New factors were also included: BREXIT impact on growth in Britain and the EU, which is expected to be insignificant, allowed dividend repatriation and shift in receiving the official financing to the next quarter. 

In addition to updated macroeconomic forecasts, NBU representatives presented a range of special topics addressed in July Inflation Report:

·         Volatility of hryvnia exchange rate:

·         Experience of other counties shows that after introduction of inflation targeting, the rate volatility initially increases, first of all, due to shifting away from fixed rate, but eventually it is to decrease to moderate 2-15%. On the one hand, further implementation of inflation targeting in Ukraine has to ensure similar moderate volatility of the hryvnia exchange rate, on the other, it is to help to curb the intensity of exchange rate outbursts in case of drastical change in internal or external factors.

·         Impact of lower unified social tax on salaries:

·         Lower unified social tax was only partially realized in higher salaries according to findings of business survey carried out by the NBU. Only about the quarter of enterprises aimed released funds at increasing salaries when the rest used them on covering losses due to exchange rate volatility, payment of other taxes, and hiring new employees.

·         Industrial inflation impact on consumer prices in Ukraine:

·         Higher industrial inflation bear the risk of accelerating consumer inflation but in Ukraine the influence of change in producer price index on the consumer price index was weak - PPI higher by 10% per month implies about 1% of PPI growth.

·         Private money transfers to Ukraine:

·         The role of money transfers in Ukrainian economy was constantly growing  over the past years. Between 2005 and 2015, their nominal amount increased from 2.8% to 5.7% of GDP. Thus, increased number of money transfers to Ukraine in 2011-2013 somewhat strained the current account deficit increase and was the one of factors of private consumption growth. However, according to the NBU estimates, ratio of amounts of transfers to Ukraine to Ukrainian GDP will reduce gradually in the mid term.