A record low level of inflation in 2011 was largely triggered by a high crop yield and a drop in prices for food products, first and foremost, vegetables, which, according to the State Statistics Service, fell in price by 44%, while in some product groups, for example, potatoes, prices shrank by almost 60 %, according to Olena Bilan, the chief economist of the investment firm Dragon Capital.

"We cannot count on the repetition of the situation this year. The harvest will most likely be worse and food prices will grow," she said.

On the other hand, domestic demand in Ukraine is expected to slow in 2012, which will not allow product prices to increase significantly. In the third quarter of 2011, the consumption of products by households rose by almost 16% year-over-year, whereas in 2012, this figure is expected to grow by not more than 4%.

"Since demand will slow, prices for a wide range of products will not increase significantly. Thus, the inflation rate will be influenced by two opposing factors - on the one hand, a slowdown in demand, and on the other hand, a lower crop yield. At the same time, the influence of the latter will dominate, therefore, we expect inflation in 2012 at 7.5%," Bilan said.

She said that if gas prices for households are raised increased in accordance with the current requirements of the International Monetary Fund (IMF), this will add an additional 2% to the inflation figure. "But even in this case the [inflation] rate will be less than 10%, and this is a moderate level according to Ukrainian standards," Bilan said.

According to the State Statistics Service, inflation in Ukraine in 2011 was 4.6%.

Ukrinform