High inflation is explained by a combination of rapid wage growth in excess of productivity growth, higher prices on imported energy resources and other commodities, poor agricultural performance, and loose monetary conditions. On the supply side, GDP growth was propelled by double-digit value added growth in wholesale and retail trade, construction, industry as well as solid growth in transportation and communication. However, faster than expected nominal GDP growth and government debt placement on both domestic and external markets resumed in the second half of 2007, allowing the state government to catch up with expenditures in December. At the same time, due to financial turmoil on international markets in the second half of 2007, which made external finances more expensive, as well as NBU measures to restrain the growth of foreign currency denominated loans, hryvnia-denominated loans have been gathering momentum while the growth of forex-denominated loans has been slowing down. Even without the pass-through of higher energy prices to consumers, inflation may reach 13-15% due to continuing robust consumption growth (though slower than in the previous year), shortages on the food market in the first half of the year, and rallying commodity prices on international markets. At the same time, the growth of imports is likely to decelerate compared to 2007 due to slower demand growth caused by less buoyant credit growth. read more