KIEV, May 7 – President Viktor Yushchenko said Wednesday that Ukraine’s inflation this year was “terrible” and may soon start to affect the manufacturing sector and eventually slow down the country’s economic growth.
Yushchenko’s sharp remark came a day after the State Statistics Committee’s report showed that 12-month inflation in April had reached 30.2%, the highest level since January 1997.
“The [price] dynamic is terrible,” Yushchenko told reporters while on a visit to Kharkiv. “In Europe they debate whether annual inflation should be 2.5% or 3.1%, while for us this is a monthly figure.”
Ukraine’s consumer prices rose 3.1% on the month in April pushing the cumulative inflation to 13.1% in January through April, far exceeding the government’s original forecast of 9.6% for the entire year of 2008.
Measured on a 12-month basis, prices rose 30.2% between April and April 2007, an indication the government has been increasingly failing to get things under control.
But Prime Minister Yulia Tymoshenko, in a sharp contrast to Yushchenko, defended the government’s track record in fighting inflation, pointing to a “considerable” slowdown of price growth in April.
Ukraine’s monthly inflation in April was reported at 3.1%, which is a slight slowdown from 3.8% growth in March, the shift that had apparently triggered Tymoshenko’s optimism.
“As far as inflation is concerned, we have a considerable slowdown of price growth compared with the previous month,” Tymoshenko said Wednesday opening a government meeting. “Prices of more than 20 staples of food have started to fall and we have a deflation.”
Tymoshenko said her government needs one more month to stop the rampant price increases that had been recorded since the year’s beginning.
“It’s only four months that have passed since January 1,” Tymoshenko said. “In May, we will have absolutely positive [inflation] trends.”
But Yushchenko, an internationally respected economist and a former governor of the National Bank of Ukraine, said the high inflation figures were a “serious challenge” for the country.
Yushchenko said high inflation has been already demonstrating signs of a “threat” for the manufacturing sector, a development that could eventually slow down economic growth.
“When we talk about [high inflation] affecting consumers and producers, this segment may tell us that not only an individual consumer may fail to survive the price shock, but also the national economy,” Yushchenko said.
Yushchenko urged the government to draft and to announce a special program aimed at tackling high inflation, and called for quick approval of amendments to the 2008 budget to index payments for the poor.
“The situation that has been formed today demands to urgently revise the 2008 budget and to make urgent compensation [to the poor] as required by law,” Yushchenko said.
“For the rest of the people, [the program] must say that the government, the NBU have prepared all measures that would help to enter the next couple months with a manageable inflation,” Yushchenko said. (tl/ez)