Ukraine monetary base falls 1% in August

Ukraine’s monetary base fell 1.1% m/m in August (-1.3% YTD) compared to 0.6% m/m growth in the prior month, the National Bank of Ukraine (NBU) reported on Sept. 10. Money supply fell 2.1 % m/m (-0.9% YTD) compared to a 0.9% m/m decline in the prior month.  In August, the NBU purchased UAH 4.1 bln in state bonds compared to UAH 4.9 bln purchased in the previous month (UAH 62.1 bln for 8M15).

Alexander Paraschiy: The monetary base contracted largely because of the steady budget surplus (UAH 15.4 bln for 7M15) and, as a consequence, continued accumulation of public funds in Treasury accounts. Delayed local budget spending is the main source of the outstanding surplus, which means that monetary base expansion is still ahead with faster public outlays at the year end. The planned increase in wages and pensions, as well as hefty spending on housing subsidies, will release large sums of money into the economy and swell the monetary base in the coming months, we expect. Nonetheless, we have to reduce our initial forecast due to prolonged monetary base contraction in prior months. For the moment, we estimate monetary base increasing 15.3% YTD in 2015 compared to 23.0% YTD estimated previously.