Ukraine monetary base drops 2.0% in February

Ukraine’s monetary base decreased 2.0% m/m (by UAH 6.5 bln) in February (-2.2% YTD) compared to -0.3% m/m in the prior month, the National Bank of Ukraine (NBU) reported on March 11. Money supply (M3) increased 2.1% m/m (+2.2% YTD) compared to +0.1% m/m in the prior month.

Alexander Paraschiy: Residuals at the unified Treasury account were almost flat during the month (UAH 16.8 bln as of March 1 compared to UAH 16.7 bln in the previous month), which means that the budget balance did not contribute to the monetary base contraction. Neither did gross international reserves which inched up by timid 0.7% or by USD 96 mln. All in all, without Central bank survey data, which will be released later, we can hardly say precisely what defined the monetary base decrease. Among potential suspects is a UAH 14.3 bln state bonds’ issue for recapitalization of Oschadbank and Ukreximbank in February. In fact, it was just the statistical effect of increased state liabilities since the new state bonds were simply placed in bank accounts while no real movement in money occurred. 

Against this backdrop, we view the declining tendency as temporary and are still keeping our monetary base forecast at +15.1% YTD for 2016.