ourselves. business and consumer confidence initially fell as the asian events unfolded, but they did not fall excessively - for the most part they fell from well above average to about average. in the past three months, they have tended to rise moderately again as figures about the economy have confirmed that it has performed better than most expected. the fourth explanation for why growth has held up is a catch - all one - the economy just seems to be more flexible and adaptable than before. the only clear evidence of this is that productivity whether labour productivity or total factor productivity - has increased faster in the 1990s than in earlier decades. for example, total factor productivity has increased at an average annual rate of 1. 7 per cent during the expansion of the 1990s, compared with 0. 7 per cent in the 1980s and 1. 2 per cent in the 1970s. to me, this suggests that the painful adjustments that have been made over the past decade or so are paying off. by this, i mean the changes that have been made to increase competition in previously sheltered industries. this, of course, includes greater export orientation, but also greater competition in utilities and transport, which has reduced costs to other industries. it also includes the downsizing of the public sector, which has released resources. finally, our labour relations practices and wage setting machinery now have a degree of flexibility that has surprised the sceptics. i now come to a fifth factor, which most commentators view as being important - namely, the fact that in response to a contractionary external shock, the australian dollar was allowed to float down. this is the way the textbooks say the situation should be handled, and is in sharp contrast to the severe domestic squeeze that can result in the cases of countries with fixed or quasi - fixed exchange rates. the domestic economy has benefited from the lower exchange rate because exporters ’ incomes have been held up and the incentive to export maintained ( while at the same time assisting those industries that are competing against imports ). the domestic economy has also benefited because we have not had to put up interest rates in order to maintain our external parity ( as in a fixed exchange rate ) or to prop up a floating rate that threatened to fall so far that it would have had undesirable inflationary consequences. raising interest rates in response to an external contractionary shock is not something that you normally would want to do, although in extreme circumstances it may become necessary. i have heard people say that it is a good thing that,

assets and exchange rate sustainability will continue to curb growth in consumer prices. 1 / 3 bis - central bankers'speeches the course of the full - scale war continues to be the key risk to inflation dynamics and economic development the nbu's january macroeconomic forecast was based on the assumption that the security situation would improve significantly from 2025. however, the risk of protracted russian aggression against ukraine still exists. the protracted war would slow economic recovery and make it more difficult for the nbu to keep inflation close to the 5 % target in 2025 – 2026. the risk of insufficient inflows of international financing also persists. that said, positive developments have been seen recently in this respect. at the end of february, the council of the european union approved the launch of ukraine facility instrument to the total amount of eur 50 billion for 2024 – 2027. under this instrument, ukraine should receive eur 4. 5 billion of bridge financing already in march. ukraine has also reached the staff - level agreement on the third review of the program with the international monetary fund and expects to receive the decision of the imf executive board in a week. overall, the country might receive more than usd 10 billion in march – april. a pickup in external assistance inflows in the near future will allow ukraine to significantly increase its international reserves. in addition, the following risks remain relevant : the emergence of additional budget needs to maintain defense capabilities or cover substantial quasi - fiscal deficits, in the energy sector in particular significant damage to infrastructure, especially port infrastructure, which will limit exports the continuation of the partial blockade of freight transportation at border crossings with some countries, which will reduce exports and make imports more expensive the deepening of adverse trends in migration. on the other hand, positive scenarios could also materialize. thus, a significant expansion of the capacity of the maritime corridor could help ukraine's exports recover faster, and given the enhanced effectiveness of currency supervision measures, increase foreign exchange earnings. the implementation of large - scale reconstruction projects in ukraine could give considerable impetus to economic recovery. discussions have also recently intensified about the use of immobilized russian assets in ukraine's favor. the implementation of these initiatives could significantly improve key macroeconomic indicators. taking into account the further deceleration of inflation and a steady improvement in expectations, a stable fx market, and a partial reduction in the risks associated with obtaining international assistance, the nbu board decided to cut the key policy rate by