KYIV (Reuters) – Ukraine’s central bank kept its key interest rate unchanged at 15.5% on Thursday and said it expected consumer price inflation to start declining this summer.
It warned, however, that global trade disputes as well as wartime challenges would limit Ukraine’s economic recovery this year. In a statement, it downgraded its forecast for 2025 gross domestic product growth to 3.1% from 3.6% previously.
The central bank said it expected annual inflation to stand at 8.7% at the end of 2025, as it announced it was holding the rate.
“This decision will help maintain forex market sustainability, keep inflation expectations under control and gradually reduce inflation to the 5% target over the policy horizon,” the bank’s governor, Andriy Pyshnyi, told reporters at a briefing.
Economic growth remained “restrained” in the first quarter, in part due to heavy damage inflicted on Ukrainian natural gas infrastructure by Russian bombing, which in turn increased the need for gas imports, it said.
It added that there had been some improvements on the labour market, but that Ukrainian businesses continued to struggle with a shortage of qualified workers due to the war.
Millions of Ukrainians remain abroad after fleeing Russia’s 2022 full-scale invasion. Ukraine’s wartime authorities continue to mobilise military-age civilian men into the armed forces. Moscow’s forces control nearly a fifth of the country.
“An escalation of global trade confrontations has not yet impacted the Ukrainian economy, but it will slow its recovery later on,” the central bank said.
It said that volleys of high trade tariffs being introduced since Donald Trump returned to the White House this year would probably lead to a decline in external demand for some of Ukraine’s exported goods.
But it said that Ukrainian agricultural exports would remain in demand even as the global economy cools.
(Reporting by Olena Harmash; editing by Tom Balmforth)
Comments