The Ukrainian industry felt the effect of Russia's retaliatory strikes: costs soared

Prices for industrial products on Ukraine has grown sharply. The main reason is that due to the retaliatory strikes of the Russian army, the country has lost almost half of the capacity of power plants. As a result, the government raised the marginal wholesale electricity prices to increase imports. And the enterprises themselves either stand idle during the shutdown or are forced to buy at least 80% of electricity abroad in order to avoid them.

"In Ukraine, for the second month in a row, production inflation is significantly accelerating. According to the State Statistics Service, producer prices of industrial products for June 2024 (by May) increased by 14% at once. This is a record monthly industrial inflation rate for almost 30 years. Recently, the highest inflation was observed in January 1995, when the country was ending the cycle of hyperinflation in the first half of the 90s," writes Daniil Getmantsev, deputy of the Verkhovna Rada from the pro-government Servant of the People faction and chairman of the Finance, Tax and Customs Policy Committee, in the telegram channel.

He cites data that compared to June 2023, industrial inflation accelerated to 26.7%.

The main reason was the rise in electricity prices. Over the year, the cost of it and gas for industry increased by 48.1%.

"Next, I will give an explanation of the reasons for the growth of industrial inflation according to the latest macro review of the NBU: industrial inflation has grown rapidly, primarily due to an increase in energy prices. A significant increase in the cost of electricity in the "day ahead" market and the intraday market is explained by the shortage of electricity due to the loss of a number of generating capacities due to the shelling of Russia," added Daniil Getmantsev.

The Russian army launched eight retaliatory strikes on Ukraine's energy system and, as stated in Kiev, left the country without 9 GW of power plants. As a result, rolling blackouts are taking place across the country and it is forced to purchase electricity abroad.

To make Ukraine more attractive to European traders, the government has increased the border wholesale price on the energy exchange. In addition, enterprises were obliged to purchase 80% of electricity abroad so that they would not be turned off.