Ukraine monetary base increases 1.8% m/m in June

Ukraine’s monetary base increased 1.8% m/m (+8.0% YTD) and its money supply (M3) grew 1.6% m/m (+7.9% YTD) in June, according to NBU data released on July 9. NBU state bond purchase increased to UAH 4.2 bln in June (from UAH 1.1 bln in May).  The NBU’s state bonds portfolio grew by UAH 25.9 bln in 6M13.

Alexander Paraschiy: We view the active state bond purchasing through the month and 2.7% m/m growth of cash outside the banks as the main factors for the monetary base increase in June. Remarkably, the money supply is growing at the same pace as base money, which means that the banking system remains passive in terms of crediting the economy. In particular, the loan portfolio of the banking system increased by a modest 2.9% from the year start.

The monetary base increase was much faster than we anticipated. Though we still believe the NBU will tighten its monetary policy as soon as devaluation sentiments strengthen, we are revising upwards our monetary base estimate to 10.3% yoy in 2013.