Ukraine CPI falls 0.8% yoy in March

Ukraine’s consumer prices declined 0.8% yoy in March (0.0% m/m), UkrStat reported on April 5. For the 13th straight month, falling food prices (-3.2% yoy) were responsible for the outcome. Remarkably, utility rates also declined (-0.2% yoy), which hasn’t happened for at least six years. All other key CPI components increased, including the cost of education (+3.8% yoy), transportation (+2.7% yoy) and healthcare (+2.3% yoy).

Alexander Paraschiy:The authorities do not want to relax control over prices, apparently. State influence over basic food prices is the main reason for the subdued price dynamics. What’s more, the chances that the Ukrainian government will comply with IMF requirements – by increasing gas tariffs and relaxing the hryvnia – with QE3 running full steam are becoming slim. If this trend continues, it is very likely that CPI will fall below 2.0% yoy in 2013. However, before we know more details about the results of the April IMF visit, we are sticking with our CPI forecast of +3.1% in 2013, assuming natural gas tariffs increase and a minor hryvnia devaluation will be allowed.