Ukraine is becoming more expensive. Here’s how to cope with the current price increases.

At the National Bank, which is tasked with monitoring consumer price levels, other factors contributing to the current rise in inflation are also identified: the increase in prices for processed foods due to the rising cost of raw products. In other words, when the price of potatoes goes up, potato chips become even more expensive. Additionally, the devaluation of the hryvnia over the past few months is also driving price increases.

While the current rate of price growth may not be catastrophic compared to the fall of 2022, when inflation exceeded 20%, a figure of 8.6% cannot be deemed comfortable. Moreover, the situation may deteriorate in the coming months.

For instance, the consumer sentiment index, according to data from the research company Info Sapiens, fell to 72.6 points in September, down from 80 points in August. An index below 100 indicates that negative consumer sentiments prevail among citizens.

What is rising in price first?

Leading the charge in price increases are utility tariffs. The costs of water, electricity, gas, and housing have risen by 18.7%. The price of medical services is steadily increasing amid significant demand for treatment, now at 11.9%.

Education costs have increased by 12% year-on-year. Financial analyst Andrey Shevchishin explains: “There is a traditional seasonal price adjustment for educational institutions.”

However, while expenses for healthcare and education do not affect everyone equally and may not be regular for some, food prices impact everyone.

“One of the factors of inflation is the harvest,” explains hromadske economist Ilya Neskhodovsky, director of the Institute for Social and Economic Transformation. “It was quite a hot summer, which negatively affected yields and the prices of certain products, particularly vegetables.”

Over the past 12 months, cabbage has increased in price by 208.8%, potatoes by 88.8%, carrots by 51%, beets by 38.6%, butter by 24.9%, and apples by 20.4%.

A closer look at food prices reveals much about the climatic conditions of 2024.

For example, it has been a difficult year for apple trees. Late frosts followed by heat and heavy rains have affected the harvest. Thus, Ukraine may struggle to meet its apple export obligations, as there is simply not enough supply: technical varieties are constantly rising in price, while elite varieties have a weak harvest.

Regarding dairy products, Ukraine is becoming increasingly import-dependent: consumers are sometimes dissatisfied with the quality of domestic products. In the first half of October, imports of butter increased by 76% month-on-month, fermented dairy products by 11%, and cheese by 5%. Consequently, price increases are also imported, meaning they are influenced by higher prices abroad.

Excessive demand for sunflower raw materials—both in Ukraine and globally—could lead to a rise in sunflower oil prices, although its price remains virtually unchanged for now. The year has proven climatically challenging for microgreens and salads, resulting in limited supply of these products.

“Hot weather without rain has impacted yields, ripening times, and quality parameters of various vegetables and fruits, which has reflected in their availability. In particular, the prices of borscht vegetables and tomatoes have risen faster, and cucumber prices continue to grow at a high rate. Increases in raw material costs and production expenses have affected flour and grain prices,” they add at the National Bank.

As for the rising price of potatoes, it is influenced by the heightened demand from chip and snack producers. “Processing enterprises currently need chip varieties that retain starch-to-sugar conversions at lower storage temperatures,” says Igor Chechetko, director of the company “HZPC Ukraine.”

Another factor that could lead to further food price increases is the suspension of the reserving procedure for conscripted men in agricultural companies. “We urgently need reserving. Seasonality is very important in agriculture. If we cannot perform certain tasks during a specific period, for instance, now, this type of activity will halt,” stated Leonid Kozachenko, president of the “Ukrainian Agrarian Confederation.” “I don't think this will lead to a food shortage in Ukraine. However, the country's economy will weaken significantly. Thus, food prices will rise, but there will be enough of it.”

In addition to internal factors, there is a global trend of rising food prices affecting Ukraine as well. The UN, in particular, warns of increasing grain prices amid Russian shelling of Ukrainian Black Sea ports and ships operating in the region.

Adding to this is the rising cost of fuel, which has caused transport services—an expense “embedded” in the price of nearly every product—to increase by 6.7% year-on-year in September. “The first phase of the fuel excise tax increase in September primarily affected the price of autogas, while low oil prices and high reserves have kept gasoline and diesel prices from rising,” the NBU explains.

Are we becoming poorer?

“Overall, rising prices lead to a decrease in the purchasing power of the population, as there is a certain lag between price increases and subsequent wage growth,” notes economist Maria Tomilina from the Center for Economic Strategy.

Food expenses constitute a much larger share of the budgets of Ukrainians compared to those in the European Union. Let's make a basic comparison.

In the “ATB” supermarket, a kilogram of potatoes costs 26.89 hryvnias, a kilogram of “Golden” apples costs 30.95 hryvnias, and 0.9 liters of “Yagotynske” milk costs 50.20 hryvnias. The average salary in Ukraine at the beginning of October was 21,500 hryvnias, according to data from the Work.ua portal.

In Germany, the average price for a kilogram of potatoes converted to hryvnias is 43.65, for a kilogram of apples it is 99 hryvnias, and for a liter of milk it is 36 hryvnias. And this is with an average monthly salary exceeding 201,000 hryvnias, which is nearly ten times higher than the Ukrainian figure.

Taking a geographically closer country—Poland—as an example, potatoes here average cost 34.65 hryvnias per kilogram, apples 39.6 hryvnias per kilogram, and milk 40 hryvnias per liter. The average salary exceeds 87,000 hryvnias per month, which is four times higher than the average Ukrainian salary.

Economist Maria Tomilina believes that helping Ukrainians cope with high prices will primarily depend on salary growth. “Currently, there is significant competition for skilled workers, and businesses that understand this are raising wages,” she says. “The NBU expects that by the end of 2024, the nominal wage will increase by 16.1%, while the real wage will rise by 9.7%, which is slightly above the annual inflation rate of 8.5%.”

However, inflation is not standing still. “It is likely that there will be a certain acceleration in the growth of consumer prices by winter,” comments Alexander Parashiy, head of the analytical department at investment company Concorde Capital. “Much depends on the government, as there are tariff issues regulated by the state. There have already been hints that electricity is too cheap, so government actions are likely to lead to further price increases.”

The updated memorandum from the International Monetary Fund discusses the possibility of gradually increasing gas and electricity tariffs to cover production costs. However, the Ministry of Finance has stated that this is not yet a commitment of the Ukrainian government.

“In the coming months, inflation will continue to gradually rise due to increased budget expenditures, rising wage levels due to structural unemployment, and an expected increase in electricity deficits during the heating season,” adds Maria Tomilina from the Center for Economic Strategy.

Financial analyst Andrey Shevchishin, on the other hand, expects that consumer price growth in Ukraine will reach 10% by the end of 2024.

It's time to plan our finances rationally

How should one properly structure their budget, expenses, consumer behavior, and financial planning in the face of noticeable and uncomfortable price increases?

“Some consumers will change their preferences—possibly switching to cheaper products,” says Ilya Neskhodovsky, director of the Institute for Social and Economic Transformation.

He offers his own advice for those concerned about rising prices: keep a detailed record of expenses to understand where money is going. He also suggests cutting irrational spending. “It’s important to prepare a list of necessary items in advance and avoid emotional