Inflationary processes in Ukraine: main tendencies and impact factors in 2014

The low volatility of pricing in Ukraine, in 2013, on the whole, corresponded to general tendencies shaped by the crisis phenomena of the world economy. The very small increase in consumer prices was supported by low rates of the increase in the prices of the producers of consumption items. However, analysis shows that the dynamics of producers' prices does not compensate for the increase in the costs of the production of coke and products of oil processing chemicals, and, in the rest of activities, production profitability decreased as compared to 2012. Renewal of production productivity will require increased rates of producers' prices. Besides, the development of inflation processes in 2014 will be affected by the floating ex-change rate of the US dollar (introduced by the NBU).Devaluation of the hryvnia affects the inflation rates both directly, through the direct appreciation of imported consumer goods, whose share of Ukraine's domestic market, in some segments, is extremely high, and indirectly, i.e. through the increase in producers' prices due to the appreciation of the imported goods of intermediate consumption. Increased exchange rate of the dollar will have the strongest effect as speeding up the rise of prices for non-food items, in most of which the imported component exceeds 80%. Among them are, first of all, clothes, shoes, home appliances, medical items. The dynamics of prices for food items will be less affected by a moderate growth of the dollar exchange rate; however, in case of a considerable devaluation of the hryvnia, the prices for food items will considerably increase too, even despite the objective preconditions.The prices for services will grow depending on how much the devaluation of the hryvnia will make it possible to retain the reduced value of the imported energy materials.