By the end of the year, inflation in Belarus slowed to 4.6% YOY; it was at 10.6% YOY a year earlier, which was the absolute minimum since the collapse of the USSR. Food prices increased by 4.2%, non-food prices – by 2%, and paid services – by 9.5%. The main reasons for this dynamic were the following: economic crisis of 2015-16; the relative stability of the Belorussian ruble and control over the growth of the money supply. The slowdown in inflation allowed the NBRB (National Bank of Republic of Belarus) to reduce the rate for the year by 6pp to 11%. This year acceleration in price growth is expected up to 6.8%, which will be facilitated by the increase in tariffs and increased consumption.
Last year, inflation in Ukraine amounted to 13.7% YOY, compared to 12.4% YOY in 2016. Food prices rose by 17.7% YOY, 3.3% YOY a year earlier, becoming the main reason for the rise of the CPI. Adverse weather conditions affected the yield of fruits and vegetables. The reduction of livestock and more favorable conditions for the sale of products on foreign markets have fueled the rise in meat and milk prices. Exports of meat and dairy products grew rapidly with almost constant production, which created a shortage of supply and stimulated the growth of prices in the domestic market. The rapid rise in prices has forced the NBU to interrupt the cycle of reducing the interest rate. The regulator raised the rate twice, totally by 2pp to 14.5%. According to our estimates, inflation will enter this year’s target corridor (7% + – 2pp) in the second half of the year, and the rise in prices in 2018 will be 8.6%.
In 2017, inflation in Kazakhstan amounted to 7.1% YOY, 8.5% YOY a year earlier. Food prices increased by 6.5%, non-food products – by 8.9%, and paid services – by 5.9%. Thus, the NBK hit the inflation target of 6–8% YOY, and the rate cut for the year was 1.75pp to 10.25%. This year, we expect a gradual slowdown in price growth and inflation to reach the NBK’s new target range of 5-7%. At the end of the year, inflation, according to our estimates, will be 5.9% YOY, while the reduction of the base rate for 2018 may be around 1.25pp to 9%.