Inflation was slowing down, and the situation on the foreign exchange market was under control. The National Bank reports this in its review for October – December 2023.
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Consumer inflation continued to slow down (up to 5.1% y/y in November) due to a certain decrease in pressure from business expenses and improved expectations in conditions of maintaining exchange rate stability. These same factors led to a weakening of fundamental inflationary pressures. According to NBU estimates, inflation continued to decline in December.
Economic activity weakened seasonally in December, but overall economic recovery continued. High harvests and their processing supported the food industry, orders from the defense sector and railway workers – mechanical engineering, and the further expansion of maritime transport – transport work. Retail trade remained brisk.
The labor market experienced a seasonal lull on both the demand and supply side. At the same time, the revival of the economy and the slowdown in inflation contributed to the recovery of real wage growth, although it was uneven across types of activity.
The budget deficit was a record high both in December and for the year. At the same time, its annual volume turned out to be slightly lower compared to the approved figure. The main source of financing the budget deficit during the year was international aid and domestic borrowing. The latter more than doubled last year's volume due primarily to the placement of government bonds in hryvnia.
The negative balance of trade in goods decreased in November due to an increase in export supplies via the new sea route and a decrease in imports under the influence of the blockade. However, the current account deficit widened due to a delay in the arrival of grant aid from the United States. However, thanks to the receipt of international assistance, reserves decreased slightly in November, and in December they resumed growth and by the end of the year exceeded $40.5 billion.
The situation on the foreign exchange market remained controlled. This was facilitated by the intervention of the NBU and the positive return on hryvnia instruments (government bonds and deposits) in real terms.