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Monday, April 7, 2008

Ukraine Inflation March 2008

Ukraine's inflation rate rose to 26.2 percent in March, the fastest level in eight years, as global food prices surged, the government repaid people who lost savings when the Soviet Union collapsed, and Ukranian workers are out all over Eastern Europe filling gaps in local labour markets and sending remittances home. Inflation accelerated from 21.9 percent in February, the fastest pace in Europe for that month and the quickest in Ukraine since 2001, according to data released by the state statistics committee today. Consumer prices rose 3.8 percent in March from February.

Ukraine's inflation rate has more than doubled in the past year because of a surge in global food costs and rising wages produced by rapid economic growth and growing labour shortages. Consumption is also being fuelled by payments for savings lost when the Soviet Union collapsed and the state-owned Sberbank went bankrupt. Government payments alone may add 1.5 percentage points to the inflation rate this year, Economy Minister Bohdan Danilishyn said on Jan. 15. The rate, which the government aims to keep at less than 10 percent, may average 17 percent this year, according to International Monetary Fund estimates. The truth of the matter is that noone really knows at this point. Nor do we know how all this is going to end. Strangely few seem to be talking about the dangers of a "hard landing" in the Ukraine at this point, but looking how the inflation fire is now burning away out of control the danger of this must be very great indeed.

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