Ukraine monetary base surges 5.4% m/m in December

Ukraine’s monetary base surged 5.4% m/m in December
owing to last-minute fiscal spending, accelerating from a 0.7% m/m rise in
November, the National Bank of Ukraine (NBU) stated in its provisionary report
released on Jan. 17. Growth reached 4.6% on a year-to-date basis. Money supply
increased 9.5% YTD, or 6.9% m/m in December.

The NBU projected 6.4% YTD growth of monetary base in
2017 and a 9.0% YTD rise in money supply. For 2018, the NBU anticipates 7.8%
YTD growth in the monetary base and a 13.5% YTD rise in money supply.

Evgeniya Akhtyrko: We had been
expecting the December bump, but not
even to this extent. As we noted, Treasury residuals dropping UAH 49 bln (to
UAH 5.1 bln as of Jan. 1 from UAH 54.1 bln in December) promised much stronger
monetary base growth. Interestingly, the surge was slightly offset by NBU’s USD
182.5 mln net currency sale at the ForEx; however, money formation in December
still should have been stronger than just the reported UAH 20.3 bln increase.
We will know more details when monetary accounts data are released.

For 2018, we project a 6.1% YTD monetary base
increase (less than the NBU projection) owing to a lower budget deficit target
(2.5% of GDP) as well as gloomy prospects for foreign currency inflow.