Strengthening of hryvnia: Positive and negative impact on Ukraine’s economy

The National Bank of Ukraine said that the artificial deduction of the hryvnia from revaluation would not have a tangible effect on economic growth.

To National Bank, if the exchange rate had been kept at UAH 27/USD, it would add 0.1 percentage points (pp) to the current GDP growth rate starting from the Q2 of 2019, while inflation rate would be much higher.

NBU names negative consequences of the revaluation of the hryvnia: the failure to receive planned budget revenues and the loss of exporters who receive less hryvnia for their foreign exchange earnings.

The positive consequences of strengthening the hryvnia are a decrease in the rate of labor migration from the country due to an increase in citizens’ incomes, as well as a slowdown in inflation and a reduction in public debt, UNIAN reports.

Also, the deficit of foreign trade in goods for January-October of the current year (USD 10.8 billion), excluding the one-time statistical effect of customs clearance of cars with European registration, has not changed much compared to the same period in 2018.

“Another positive trend is that exports (excluding effect of customs clearance of cars with European registration) are growing more rapidly than imports. So, the export of goods increased by 8% year-on-year over 10 months, and imports by 6.8%,” the financial regulator noted.

As The Journalist reported, NBU suffered UAH 12.3 bln loss due to strengthening of hryvnia.