The annual rate of inflation in September was 34%, up 2.2 percentage points on June. The National Bank of Moldova said the rise was influenced by the increase in international quotations for energy resources, the hydrological drought with effects on the national food prices, the adjustment of charges and augmentation of costs. The depreciation of the leu against the U.S. dollar generated additional pressure, while the war in Ukraine significantly amplified the impact of all the factors. According to the central bank’s forecasts, the annual inflation in the fourth quarter of this year will reach a record high and will then change its trajectory, following a downward trend throughout the forecast period, IPN reports.
“The annual rate of inflation will follow a downward trend until the end of the forecast period and will return to the variation interval in the second quarter of 2024. Such a development will be influenced by all the components of inflation. The aggregate period will be negative throughout the forecast period owing to the deterioration of external demand and financing of domestic consumption and also due to the restrictive monetary conditions, but will be stimulated by the positive fiscal impulse,” said the National Bank.
The institution noted the economics activity slowed down in the first half of the year, the real annual GDP growth decreasing by 0.9% in the second quarter of 2022. The tempering of economic activity was determined by the reduced internal demand, growing uncertainty in the region and small harvest against the unfavorable agro-meteorological conditions. As regards demand, exports, consumption of public administration and imports grew, while investments and consumption of the population declined. As to supply, the financial, medical and social assistance sectors developed positively, while the agricultural, industrial and building sectors contracted. A number of indicators available for July-August 2022 shaped the conditions for reduced economic activity in the third quarter of 2022 as well.
As regards the monetary conditions, the excessive liquidity in the banking sector totaled 4.3 billion lei, decreasing by 0.3 billion lei in the third quarter of 2022 on the previous quarter. The annual growth of the monetary aggregates in the third quarter of III 2022 declined compared with the previous quarter mainly due to the amount of money in circulation. The interest rates on the balance of loans in national currency grew by 1.95 percentage points against the previous quarter, while on deposits rose by 2.58 percentage points. The interest rates on loans and deposits in foreign currency didn’t change essentially.
It is forecast that the tempering of economic activity and reduced supply caused by the bigger geopolitical risks will influence the quotations for raw material. This way, consumer prices will continue growing, at least due to the smaller harvest this year, increase in external prices of energy, the war in Ukraine, the adjustment of natural gas rates and prices of related services (with their secondary effects), the indexation of pensions and pay raises.
