Ukraine monetary base declines 1.2% in May

Ukraine’s monetary base decreased 1.2% m/m, or UAH 5.0
bln in May, after a 4.8% m/m increase in the prior month, the National Bank of
Ukraine (NBU) stated in a provisional report on June 13. The monetary base has
increased 2.0% in YTD. Meanwhile, money supply continued to increase in May,
inching up 0.5% m/m (-0.9% YTD).

Evgeniya Akhtyrko: More
stringent public spending, which resulted in more-than-doubled treasury
residuals (from UAH 5.5 bln to UAH 11.5 bln) in May, apparently caused the
monetary base decline. Another factor was an USD 18.5 mln foreign currency
interest payment, which contributed to the drop in gross international reserves
(by 1.6%, or USD 302 mln).

The month-to-month fluctuations in the monetary
base are likely through the year end. We expect to see a 6.1% YTD increase in
2018 (vs. 4.6% YTD in 2017) amid a controlled budget deficit and gross reserves
growth.