National Bank of Ukraine estimates influence of Mideast events on inflation at 0.5-1 pp

MOSCOW. April 9 (Interfax) - The growing fuel prices in Ukraine amid the events in the Middle East could add 0.5 to 1 percentage points (pp) to inflation in 2026, while secondary effects could add another 1-2 pp, Vladimir Lepushinsky, the National Bank of Ukraine's (NBU) deputy governor, told Ukrainian media.

"We anticipated that fuel prices would rise in March by 12%-16% month-on-month, and the actual figure was 14%, and this factor contributed 0.4 pp to annual inflation in March," he said.

Secondary effects will include the extension of oil and fuel price hikes to transportation one to two months later, and then directly to the cost of goods and services, Lepushinsky said. This process may take longer in the agricultural sector, as farmers made their purchases earlier at lower prices, he said.

"The events in the Middle East are also putting pressure on Ukraine's trade balance due to higher prices for gas and petroleum products. If energy prices remain high, the negative impact could range from $1.5 billion to $3 billion a year, and higher fertilizer prices will add another $140 million," Lepushinsky said.

At the same time, higher prices for agricultural products could act as a compensating factor, as demand for them remains inelastic, and if global food prices keep growing, this will support the Ukrainian economy, he said.

As reported, the NBU projected in its January inflation report that inflation should slow to 7.5% by the end of 2026, to 6% in 2027, and return to the 5% target in 2028.