Mobile Communication Tariff Increase in January-February Raises Annual Inflation by 0.25 Percentage Points – NBU

In Ukraine, the recent 15% increase in mobile communication tariffs during January and February 2023 has resulted in a 0.25 percentage point rise in annual inflation. This information was disclosed by Volodymyr Lepushynskyi, the Deputy Head of the National Bank of Ukraine (NBU), during an interview with the Interfax-Ukraine news agency. One of the primary reasons for this tariff increase has been the energy deficit, which has impacted business costs and, consequently, inflationary processes across the country.

Lepushynskyi emphasized that this situation serves as a clear example of how the energy deficit during January and February, due to rising business expenses, has partially influenced inflation. 'We do not expect the impact to be significant going forward, as energy deficits have varying effects on inflation. On one hand, there are higher business costs; on the other hand, there is lower consumer demand,' he highlighted.

Furthermore, according to Lepushynskyi, the 22.3% surge in producer prices in February, as reported by the State Statistics Service, can also be attributed to the rising cost of electricity amid significant energy deficits in January and February. 'However, this spike is not a 'game changer' – it is a classic example of a supply shock. We expect that some of the costs will be absorbed by the producers, while part will be passed on to consumers; this process is already underway. The NBU has indicated this risk and accounted for it in its January macroeconomic forecast,' the Deputy Head of the NBU stated.

Lepushynskyi also commented that the energy deficit in January was somewhat lower than the NBU's assumptions, but there was a very unfavorable combination: significant destruction of energy infrastructure and record low temperatures in recent years. Energy-intensive industries, such as metallurgy, chemistry, and machine engineering, particularly in frontline regions and Kyiv, have been the hardest hit.

However, Lepushynskyi noted that from mid-February, the situation in the energy sector began to improve due to additional generation from renewable energy sources, such as solar and wind, as well as a warming trend. 'In March, the business activity expectations index finally moved into positive territory, which is encouraging. Even in industry, there is now positive dynamics,' he stressed.

Lepushynskyi also reminded that according to data from the State Statistics Service, annual inflation rose to 7.6% in February, up from 7.4%. 'Currently, we estimate that the inflation rate for March will remain approximately at this level, while our forecast anticipated a decrease to 7%,' he noted.

Regarding the impact of energy deficits on the currency market, Lepushynskyi remarked that it has been moderate: production, and consequently, the export of metallurgical, mining, and chemical products has decreased, while the import of energy resources surged to 1.2 GW in January and a record 1.9 GW in February. 'However, the situation stabilized in March. Additionally, larger-than-expected gas reserves in our storage facilities (5.1 billion cubic meters) reduce the need for gas imports in the future,' he emphasized.

It is worth noting that at the end of January, the NBU downgraded its inflation forecast for Ukraine for 2026 to 7.5% from 6.6% in its October inflation report, and for 2027 to 6% from 5%. Inflation in Ukraine decreased to 8% in 2025 from 12% the previous year. In 2023, it fell to 5.1% after a spike to 26.6% the year before.