Changes in Ukraine’s Financial Sector: How Citizens Adapt to New Economic Realities
In the current economic conditions, Ukraine is experiencing significant transformations that shape the behavior of its citizens and the country’s financial sector.
The traditional method of preserving savings — bank deposits in hryvnia — is gradually changing under the influence of macroeconomic shifts and external challenges.
In September, inflation in Ukraine slowed to nearly 12%, positively affecting citizens’ ability to earn at least modest but stable returns from their deposits.
Meanwhile, deposit rates in hryvnia increased to over 13.7%, allowing more Ukrainians to protect their savings from devaluation, considering taxation of income.
However, the main form of savings remains foreign currency cash, which more than half of the population regards as the most reliable way to preserve their assets.
Given forecasts of a rapid devaluation of the national currency due to internal and external factors, Ukrainians are actively purchasing dollars and euros.
This trend promotes growth in foreign currency deposits in banks, especially those offering the highest rates, but the question remains whether foreign currency deposits truly provide protection from devaluation.
For instance, in August, Ukrainians bought foreign currency worth over $359 million, and in September — nearly $381 million.
Historically, the hryvnia continues to lose its value against the dollar, with the exchange rate rising from 8 to 41.81 hryvnias per dollar over the past 15 years, making currency assets increasingly attractive for savings.
However, the purchasing power of those holding dollars remained almost unchanged—they can buy roughly the same amount of goods and services as before the war.
Therefore, currency is viewed as a reliable way to safeguard savings.
Still, deposit interest rates in hryvnia remain high, prompting the population to keep funds in the national currency — though actual profitability can vary significantly due to volatile economic conditions.
This raises questions about how to mitigate risks of devaluation, as Ukrainians actively seek optimal solutions to preserve and increase their wealth amidst economic instability.
Banks try to balance their offerings by providing high-interest rates for hryvnia and currency deposits, but due to regulatory restrictions, depositing cash foreign currency has become more difficult, leading to currency conversion into hryvnia at the bank’s fixed rates, which can reduce potential earnings by up to 1%.
Additionally, interest rates on foreign currency deposits are considerably lower than those in hryvnia, complicating direct currency-based savings strategies for many Ukrainians.
Despite their desire to save in foreign currency, most prefer cash storage at home due to low bank rates and NBU restrictions.
This creates a complex and unpredictable currency market in Ukraine, where each individual must choose their savings strategy based on personal goals and risk considerations, factoring in the dynamic economic and political landscape.