Bank deposits up, loans continue decline; IMF money boosts budget revenues; November inflation at 1.1 percent; Central bank reserves down slightly
Bank deposits up, loans continue decline
Banking sector deposits rose by 0.9 percent in November to Hr 320 billion on stronger inflows of household savings. Hryvnia-denominated household deposits increased 1.1 percent month-on-month in November to Hr 95 billion following five consecutive months of decline, boosted by higher interest rates on local-currency deposits as well as by improved public confidence in banks and diminishing devaluation expectations. At the same time, bank lending remained subdued in November, especially in the household segment, though hryvnia-denominated loans to corporations inched up as banks continued to support their most reliable corporate customers. Total bank loans declined by 1.2 percent last month to Hr 718 billion (down 2.2 percent year-to-date), with loan taken out by households declining from Hr 243 billion to Hr 239 billion.
IMF money boosts budget revenues
State budget revenues rose to an estimated Hr 35 billion in November, or double their monthly average volume so far in 2009, after the government used International Monetary Fund money to shore up its finances. November revenues were boosted by $2.1 billion worth of Special Drawings Rights, an IMF reserve asset, which Ukraine received in August-September as part of the Fund’s global liquidity injection program. The money was initially transferred to the National Bank of Ukraine but the government asked to put it into the State Treasury account in November and counted it as part of budget revenues, the daily Kommersant reported. The government was forced to resort to such unorthodox practices after stubbornly refusing to cut budget spending ahead of January presidential elections while having no other means to close the budget gap amid the continuing economic decline. According to central bank statistics, government accounts with the NBU dropped to a record low Hr 3.5 billion by end-October after peaking at Hr 28 billion in July thanks to an IMF loan tranche.
November inflation at 1.1 percent
Consumer prices rose by 1.1 percent in November compared to October but slowed further in annualized terms to 13.6 percent (from 14.1 percent in October). The pickup in month-on-month inflation was due to a seasonal jump in prices for several food products as well as an upsurge in sugar prices in line with global trends. Other than that, consumer price growth remained moderate due to weak domestic demand and barely changed utility prices for households. Inflation in Ukraine is set to continue to decelerate in the coming months as domestic demand remains weak and the next adjustment in utility prices is unlikely before the second half of next year. In addition, the sharp hryvnia depreciation a year ago that made its way into consumer prices last December-March created a high comparison base that will also contribute to slower inflation in the near term.
Central bank reserves down slightly
The National Bank of Ukraine’s gross foreign reserves declined by $ 400 million to $27.3 billion in November. The NBU sold $0.5 billion of foreign currency on a net basis last month compared to $300 million in October. At the same time, the hryvnia continued to appreciate gradually in November, hitting Hr 7.98:USD at the end of the month, its record high since August. Higher supply of foreign currency even enabled the central bank to buy some cash into its reserves on selected days but its reserves were still down for the month due to gas payments to Russia ($480 million for October gas imports). The NBU attributed the hryvnia’s strengthening in November to an easier foreign debt repayment schedule, which likely compensated for stronger household demand for foreign cash. Households bought a net of $1 billion via bank outlets last month versus $800 million in October.
