Ukraine CPI falls 0.3% in 2013

Ukraine’s consumer prices fell 0.3% yoy (+0.5% ytd) in 2013, according to state statistics released on Jan.6. Declining food prices (-2.2% yoy) defined the result. All other key CPI components grew, led by education (+3.4% yoy), healthcare (+2.3% yoy), public transportation (+2.0%) and utilities (+0.3%).

Alexander Paraschiy: The annual CPI result hit our estimate for the last quarter. Deflation occurred in light of this year’s successful grain harvest and no progress in gaining an IMF loan, which would have required boosted household gas prices. We do not see this picture changing much in 2014. With the abundant Russian loan (USD 12 bln expected in 2014 after USD 3 bln received in December), we anticipate neither heating cost hikes nor substantial hryvnia exchange rate volatility. The robust 2013 harvest should keep food prices subdued this year. Against this backdrop, we project a 1.3% yoy CPI increase for 2014.