Ukraine monetary base decreases 0.9% in October

Ukraine’s monetary base decreased 0.9% m/m in October (-4.4% YTD) compared to a 2.3% m/m decline in the prior month, the National Bank of Ukraine (NBU) reported on Nov 12.　 Money supply increased 2.4% m/m (+0.2% YTD). In October, the NBU purchased UAH 2.0 bln in state bonds compared to UAH 5.0 bln purchased in the previous month (UAH 69.1 bln for 10M15).

Alexander Paraschiy: The further decline of monetary base looks rather disturbing. Impressive accumulations on the unified treasury account (UAH 43.6 bln) remain the main reason for this trend. Now there is a big question on whether the budget indeed will disburse all these accumulated funds by the year end, raising the risks for stronger hryvnia decline, or the authorities will delay with spending, trying to prevent hryvnia’s volatility. Though the answer is not clear, we are keeping our forecast unchanged for 15.3% YTD in monetary base growth in 2015, assuming full disbursement by the last month. At the same time, the treasury accumulations being passed onto next year (especially at local level) also remains a possible scenario.