Ukraine monetary base drops 0.7% in September

Ukraine’s monetary base dropped 0.7% m/m in September (+5.7% YTD) from 0.8% m/m growth in the prior month, the National Bank of Ukraine (NBU) reported on Oct. 13. Money supply (M3) increased 0.6% m/m in September (+6.0% YTD) from 0.3% m/m in the prior month.

Alexander Paraschiy: Ukraine’s monetary aggregates keep surprising with their high volatility. After five months of consecutive growth between April and August, the monetary base suddenly shrunk in September, disregarding a 10% rise in gross international reserves driven by USD 2 bln in external loans (from the IMF and EU) that month. Meanwhile, the traditional channel of monetary base replenishment – ForEx interventions – was negative in September as the NBU sold USD 130 mln net. Public spending also did not overtake the leading role in monetary base formation with net claims on the government decreased 1.6% in September (-21.4% YTD for 9M16). So we’re dropping our declared intention to revise our monetary base forecast and we are keeping our initial projection at +7.6% YTD for 2016. We still assume public spending will be the main source of monetary base formation in the last few months of the year.