Food prices in Ukraine have approached European levels, and some are already higher – NBU

Food prices in Ukraine have approached the level of prices in European Union countries, and for some, they have even exceeded it. For example, the cost of butter in Ukraine is relatively higher than the European average, specifically 20–25% higher compared to Poland. This is stated in the National Bank’s inflation report for July, as reported by UNN.

DetailsIt is reported that in recent years, food prices in Ukraine have approached the level of prices in EU countries. This process continued over the past decade but was temporarily adjusted due to the weakening of the hryvnia against the euro in 2023–2024, when, against the backdrop of logistical complications, the cost of Ukrainian products in euro equivalent decreased.

However, already in the first half of 2025, convergence resumed, and Ukrainian prices again began to approach European ones, and for a number of goods, they even exceeded the level of neighboring countries.

The National Bank explains that such dynamics were determined by both internal factors (weather conditions, consequences of the war, production costs, and domestic demand) and external conditions (world prices, trade preferences, external demand). However, on the other hand, it worsens the condition of domestic producers and increases pressure on international reserves. Thus, ensuring food and macro-financial stability requires solving structural problems with food supply.

Since 2020, food inflation worldwide has consistently outpaced overall inflation. Over five years, food prices globally have risen by more than 35%, while prices for a wide range of goods and services have increased by an average of only 25%. The sharp rise in food prices can be explained by a combination of global shocks: the COVID-19 pandemic, the war in Ukraine, and climate change, which disrupted supply chains and led to higher prices for agricultural products. These shocks were further exacerbated by rising energy prices, high budget expenditures, and loose monetary policies in a number of countries, creating a “perfect storm” for food inflation. Together, these factors significantly affected both supply and demand in global food markets.

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The National Bank notes that the cost of food products in Ukraine is formed under the influence of both internal factors (yields, production costs, consumer demand, etc.) and external conditions, including world prices, access of Ukrainian producers to foreign markets, and volumes of exports and imports of products.

Which products are more expensive in Ukraine

Over recent years, food prices in Ukraine and EU countries have been rising, reflecting general trends in global food and energy markets, as well as an increase in aggregate demand. Since 2016, food prices in Ukraine have increased by an average of 79% (in euro equivalent), while in EU countries, they have increased by only 46%. However, the price dynamics for individual product groups were heterogeneous, as were the deviations of prices for certain products in Ukraine from prices in EU countries.

For example, prices for bread and cereals, fruits and vegetables, and freshwater fish remain lower than in Europe, thanks to lower raw material, labor, and logistics costs compared to the EU. And sunflower oil is cheaper (specifically 20–25% cheaper than in Poland) due to developed domestic production. At the same time, butter prices in Ukraine are relatively higher than the European average (specifically 20–25% higher compared to Poland), which is due to the high cost of production and significant state support for agricultural producers in EU countries. Livestock products also show similar contrasts: pork and dairy products are more expensive than Polish ones due to structural problems in the industry and differences in state support, while poultry meat and eggs are cheaper due to the efficiency of large producers, vertical integration, and economies of scale.

The National Bank explains that such selective convergence has several reasons. Firstly, despite the general trend towards price convergence with European ones, for certain basic products (especially those that were traditionally significantly cheaper in Ukraine), there may be a certain psychological threshold, after which consumers significantly change their behavior. A rapid approach of prices for these goods to the European level or even exceeding the price level in neighboring countries can cause a significant drop in domestic demand or a reorientation to cheaper substitute goods. Thus, the speed of price convergence is partly determined by the purchasing power of the Ukrainian consumer.

Secondly, for certain sectors, particularly livestock farming, the increase in prices, and thus their approximation to the European level, is largely determined by the level of development of the respective industry. Thus, the constant reduction in livestock numbers leads to a shortage of domestic supply and high production costs, which makes this segment of the Ukrainian market attractive for imports.

What causes higher prices in Ukraine compared to EU countriesA significant factor contributing to higher prices in Ukraine compared to EU countries is the difference in VAT rates. Many EU countries have a reduced VAT rate on basic food products. In particular, in Poland, a 5% rate applies to basic food products, while in Ukraine it is 20%, and from February 2022 to March 2024, the Polish government reduced it to zero to curb food inflation.

In 2023–2024, food inflation in Ukraine was slightly higher than in EU countries, but due to the devaluation of the hryvnia against the euro, the cost of some products in euro equivalent decreased. At the same time, the relative level of food prices in neighboring countries mostly increased. In particular, the increase in the euro equivalent of Polish prices was associated with the trend of strengthening the zloty. However, in the first half of 2025, the convergence of Ukrainian prices resumed, despite the devaluation of the hryvnia against the euro. This was due to high rates of food inflation, caused, in particular, by insufficient domestic supply due to unfavorable weather conditions, primarily last year. Ukrainian food prices approached Polish ones and exceeded the level of some neighboring countries (including Romania, Slovakia, and Turkey).

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Relatively high prices and negative domestic factors led to an increase in food imports to Ukraine. Thus, in January–June 2025, pork imports increased 4.4 times compared to the corresponding period last year, milk and cream – 1.6 times, cereals – by 48%. In addition, vegetable imports doubled, and apple imports increased eightfold, which allowed partially smoothing seasonal price fluctuations caused by unfavorable weather conditions. This indicates that imports are increasingly playing the role of a key mechanism for forming additional supply in the domestic market, helping to curb price growth and generally smooth their volatility. This channel plays an important role, strengthening the NBU’s control over inflation, given the high share of food products in the consumer basket. At the same time, higher imports increase pressure on international reserves, and also worsen the condition of domestic producers. Thus, the active integration of the Ukrainian food market into the European one has both advantages in terms of price stabilization and challenges related to the need to solve internal structural problems to ensure food and macro-financial stability.