In the second quarter of this year, the Moldovan leu hit its four years’ low, dropping 4.8% against the dollar and 5.7% against the euro, according to the economist Veaceslav Ioniță of the think-tank IDIS Viitorul.

Ioniță posted on his blog that during this period the leu broke above two important levels, of 18 lei for one dollar and 20 lei for one euro.

The economist says the depreciation is due to a higher demand for foreign currency. In the last one year and a half, the annual demand for foreign currency rose by the equivalent of $570 million to $2.2 billion, whereas the supply rose much slower and is at $2.09 billion at present. While a year ago the annual surplus was $370 million, now there is a deficit of $130 million.

The deficit grew sharper ahead of elections, says Ioniță, when demand surpassed supply by $240 million. Another factor that drove a higher demand is consumption not covered by income, in other words, a rise in consumer loans. From January 2018 to May 2019, they amounted to an equivalent of 1.7 billion lei, mostly in foreign currency, contributing to the deficit.

Ioniță claims the National Bank has failed it mission of intervening to avoid a steep oscillation. Despite this, he predicts the leu will have a relatively stable rate in the next few months, with a slightly downward trend against the EUR&USD basket, with the except of August, when the leu traditionally sees some recovery thanks to massive retail selling.