The level of inflation depends on the policy pursued by the regulator. The National Bank may use different strategies.
The Ukrainian experience of 2003-2007, as well as the experience of China in the 80s, proves that during the rapid growth of the economy, inflation is usually higher and is at the level of 10-11%. It can also be even higher if you do not apply a restraining inflation policy at the state level.
One of the mechanisms to minimize inflation in Ukraine under conditions of import indicators in relation to GDP at the level of 50 percent is a mechanism for strengthening the national currency. Another mechanism is the policy of selling state enterprises and land pools through auctions (11 million hectares of land is owned by the state). This will contribute to the accumulation of speculative and investment capital, and will also positively affect the financing of the primary budget deficit, provoked by a sharp decrease in the tax burden on the economy.
There are two inflationary scenarios:
- keeping constant exchange rate and inflation at 10% per year;
- inflation is declining, according to the current forecast of the NBU.