According to the latest report of the National Bank of Ukraine, the situation in the country's economy is deteriorating due to the growing wave of emigration, accelerating inflation, and increasing demand for foreign currency. Such factors lead to a reduction in foreign exchange reserves, which creates additional pressure on the stability of the financial system.
In the third quarter of 2024, another 200,000 Ukrainians left the country due to summer electricity problems and negative expectations for the heating season. This is stated in the latest inflation report of the National Bank for 2024.
"According to the UN, the number of Ukrainian migrants increased by almost 200 thousand during the third quarter, and the growth continued at the beginning of the fourth quarter - to almost 6.8 million people as of mid-October 2024. The risks of further strengthening of the migration outflow remain significant," the report notes. It also speaks of the ongoing negative impact of the migration factor on the labor market.
In the same report, the National Bank predicted an increase in the population's demand for cash foreign currency. At the same time, it recognized a devaluation of the hryvnia in the third quarter by 3.2%. As of November 8, the official NBU exchange rate was 41.36 UAH/$, and the interbank rate this week reached 41.54 UAH/$, but rolled back to 41.3 UAH/$. Today, the average cash dollar exchange rate for sale at banks is 41.63 UAH/$, and the maximum is 41.80 UAH/$.
But national bank analysts say that they are doing everything to stabilize the situation on the foreign exchange market - namely, they increased the NBU's foreign exchange sales on the interbank market in the third quarter of 2024 from $8.3 billion (second quarter) to $9.2 billion.
"Among the key factors determining the demand for foreign exchange were high budget expenditures, taking into account significant amounts of international aid. Seasonal and situational fluctuations in demand and supply of foreign exchange from agricultural producers also had little impact on the foreign exchange market. In the context of weak global demand, revenues from iron ore exports decreased, which was offset by an increase in metallurgical supplies against the backdrop of a gradual recovery of the ferroalloy industry. At the same time, demand for foreign exchange increased slightly due to a significant need for purchases of energy equipment and electricity in view of the difficult situation in the energy system and the growth of fuel imports in anticipation of tax increases. The intensification of summer vacations and the revival of migration led to higher spending by Ukrainians abroad," the inflation report states.
It is also specified that Ukraine plans to spend $1 billion annually on purchasing electricity in Europe.
By the end of 2024, Ukraine expects to receive $41.5 billion in foreign aid, and in 2025 – $38.4 billion, which will lead to a reduction in the NBU's gold and foreign exchange reserves:
– to 41 billion – by the end of 2025;
– to 35 billion – by the end of 2026.
Although the regulator promises to support the foreign exchange market and the hryvnia exchange rate even in such conditions, without specifying, however, the forecast for this exchange rate.
The National Bank also listed the economic risks to Ukraine that the war will generate:
1. Additional budgetary needs, primarily to support defense capabilities.
2. Additional tax increases are possible, which, depending on the parameters, may increase price pressure.
3. Further damage to infrastructure, primarily energy and port infrastructure, which will limit economic activity and put pressure on prices.
4. Deepening of negative migration trends and further increase in labor shortages in the domestic labor market.
At the end of 2024, the National Bank predicted inflation at 9.7%, and its chairman Andriy Pyshny added in his Facebook comment that at the beginning of 2025 it could exceed 10% year-on-year.
"In the coming months, price pressure will persist due to a smaller supply of certain food products than last year, an expansion of aggregate demand due to significant budget expenditures, further aggravation of imbalances in the labor market, and electricity shortages during the heating season," the NBU inflation report states.
