National Bank of Ukraine: hundreds of thousands of people will flee Ukraine due to power outages

The National Bank of Ukraine expects that 700 thousand more people will leave the country this year and next. The NBU attributes this to power outages.

"The deterioration of the energy situation and the slow normalization of economic conditions will lead to a greater outflow of migrants abroad in 2024-2025 than previously expected," the new inflation report of the National Bank of Ukraine says.

According to the NBU, in 2024-2025, a further outflow of migrants abroad is expected (about 400 and 300 thousand people, respectively).

"This assumption is worsened compared to the April inflation report due to the significant destruction of the Ukrainian energy system, accompanied by prolonged power outages and exacerbating the risks for the heating season. In addition to everyday difficulties, frequent outages negatively affect production processes, which reduces economic activity and demand for labor, further stimulating migration," the National Bank of Ukraine reports.

During the second quarter, the threat of further losses of energy infrastructure became a reality, which gave grounds to worsen estimates of the electricity shortage, the bank's analysts write.

"As expected, a significant deficit appeared already in the second quarter, and at the beginning of the third quarter it worsened due to hot weather and subsequent destruction. At the same time, the restoration of lost capacities and the construction of new ones require considerable time and funding. As a result, the assumptions about the shortage of electricity have been significantly worsened for 2024-2026: more than 7% in 2024 (preliminary estimate — 5%), about 8% in 2025 (preliminary estimate — 4%) and about 5% in 2026 (no deficit was expected)," the NBU added.

Imports from the EU will partially reduce the deficit of own capacities, however, the price of imported electricity is higher than domestic and the annual cost of such imports will be about $ 1 billion, experts from the National Bank of Ukraine noted.

On the eve of the Verkhovna Rada deputy from the pro-government faction "Servant of the People" and chairman of the Committee on Finance, Tax and Customs Policy Daniil Getmantsev said that the prices of manufacturers of industrial products in June 2024 (by May) immediately increased by 14%. This is a record monthly industrial inflation rate for almost 30 years.

The main reason was the rise in electricity prices. Over the year, the cost of oil 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," Daniil Getmantsev wrote in the telegram channel.

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.