Ukraine monetary base grows 3.2% m/m in February

Ukraine’s monetary base grew 3.2% m/m (1.4% ytd), or
UAH 12.5 bln in February, rebounding from a 1.7% m/m drop in the prior month,
the National Bank of Ukraine (NBU) stated in a provisionary report on March 13.
Meanwhile, money supply decreased 0.5% m/m (-3.2% ytd) after a 2.7% m/m drop in January.

Evgeniya Akhtyrko: Treasury
residuals plummeted 51.0% m/m (to UAH 9.9 bln from UAH 20.1 bln) in February,
implying that public spending helped boost the monetary base after drying up in
the prior month. The central bank’s net currency purchase on the ForEx of USD
396.9 mln also contributed to the monetary base increase.

The decline in treasury residuals to as low as UAH 9.9
bln as of March 1 was quite unexpected, given the government’s traditional
practice of accumulating budget receipts throughout the year, followed by a
spending burst at the year end. Recall,
treasury residuals dropped to UAH 5.1 bln as of Jan. 1 after averaging UAH 45.3
bln throughout 2017.

Further budget spending throughout the year will add
to the money circulating in the economy, prompting monetary indicators to grow.
For 2018, we project a 6.1% ytd monetary base increase (vs. 4.6% ytd in 2017).