Ukraine monetary base surges 14% YTD in 2016

Ukraine’s monetary base jumped 6.7% m/m in December (+0.8% m/m in November) resulting in 13.6% YTD monetary base growth for the year, the National Bank of Ukraine (NBU) said on Jan. 16. Money supply also sped up to 5.4% m/m from -1.0% m/m in November. For 2016, money supply grew 10.8% YTD.

Alexander Paraschiy: The year-end monetary base growth was much stronger than our projection of 7.6% YTD. December growth exceeded our expectations, driven by stronger public spending (Treasury residuals plunged 48.3% in December to UAH 14.3 bln) and support for Privatbank as the NBU monetized UAH 25.8 bln in state bonds from the bank’s statutory capital.

For 2017, we expect the monetary base growth to slow on the back of the NBU’s intention to curb inflation tendencies. However, given that the NBU will keep pumping hryvnia into the nationalized Privatbank, the monetary base increase might be stronger than our previous estimate of 6.0% YTD. Growth rates should remain in the single digits nonetheless. We project a 8.6% YTD monetary base increase by the end of 2017.