The National Bank of Ukraine (NBU) has worsened its inflation outlook for 2022 to slightly more than 30% from more than 20% in its previous forecast and expects its return to the 5% target in 2025, the press service of the regulators said on Thursday, July 21.

"Inflation pressures will persist: inflation will exceed 30% yoy as of the end of 2022. It will slow considerably in the next years, albeit remaining much above the NBU's target of 5%, primarily due to the consequences of the war," it said.

The NBU expects that taking into account the consequences of the war and the large contribution of the increase in administered prices, inflation will drop to 20.7% in 2023, and 9.4% in 2024.

The NBU's baseline scenario contains a number of assumptions, including the assumptions that in 2023 logistics will recover, businesses will face lower risks, and harvests will increase gradually. This would have a positive impact on expectations and weaken the inflationary effect of supply shocks

A decline in global inflation and the NBU's tight monetary policy will additionally foster disinflation, the central bank said.

In addition, consumer and investment demand will remain restrained for a long time, which will also slow down inflation in the coming years.

On the other hand, persistently high energy prices will be an obstacle to faster disinflation and will require a review of utility tariffs in order to balance state finances.

As reported, in 2021 inflation in Ukraine rose to 10% from 5% in 2020 and 4.1% in 2019, while underlying inflation rose to 7.9% against 4.5% a year earlier.

In H1 2022, inflation in annual terms rose to 21.5% in June from 18% in May, 16.4% in April, 13.7% in March, 10.7% in February and 10% in January.