Ukraine monetary base increases 4.5% in June

Ukraine’s monetary base increased 4.5% m/m (and 5.0% YTD) in June from 0.5% m/m in the prior month, the National Bank of Ukraine (NBU) reported on July 14.  Money supply (M3) increased 1.5% m/m in June (+4.2% YTD) from 0.5% m/m in the prior month.

Alexander Paraschiy: The monetary base grew owing to both net foreign assets, which rose 2.9% m/m, and net domestic assets, which grew 1.9% m/m. Gross international reserves swelling by USD 451 mln to USD 14.0 bln was responsible for the net foreign assets increase. Net domestic assets grew probably on the back of faster budget spending. Though June fiscal numbers aren’t available so far, we know Treasury accumulations decreased (in particular, residuals slid 2.3%). 

Though the upward trend of the monetary base was in line with our expectations, its sharp acceleration in June – against a backdrop of 0.4% growth in 5M16 – was a surprise. Given the extreme volatility of economic statistics this year, we are not rushing to revise our initial 2016 monetary base forecast of 7.6% YTD growth. However, against the backdrop of further active purchases of foreign currency at the ForEx by the NBU, we see an increasing probability for a much stronger increase in the monetary base this year.