Ukraine monetary base falls 4% m/m in January

Ukraine’s monetary base fell 4.1% m/m in January while money supply decreased 1.8% m/m, the Economy Ministry reported on February 10.

Alexander Paraschiy: External redemptions (USD 0.65 bln to the IMF) and resumed tension at the ForEx market were the main factors in monetary base contraction. Amidst the escalated political conflict, we observed high foreign currency demand along with quickly shrinking hryvnia liquidity in the banking sector. In light of the trend, we could hardly anticipate the monetary aggregates to expand.

Yet we do not see the sliding monetary trend continuing. In light of the current stabilized political tension and continued overregulation of the ForEx market, we anticipate the economy will stagnate with subsequent consequences for fiscal collections. Against this backdrop, we expect the NBU to more actively fund the budget in the upcoming months, pushing monetary aggregates up. By the end of the year, we project the monetary base to have grown 15.5%.