Moldovan leu follows a contradictory development path, economic expert

12.07.2019 18:02
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The evolution of the Moldovan leu is contradictory and fluctuates from abrupt depreciations to significant appreciations. In the first half of 2019, the national currency depreciated both against the U.S. dollar and against the European common currency by almost 6%, economist Ion Tornea was quoted by IPN as saying in the program “15 Minutes of Economic Realism”.

The expert said this was one of the most significant depreciations after that witnessed in 2014-2015, determinate by the bank fraud, and after that of 2009, determined by the regional financial-economic crisis. The main causes of the depreciation of the national currency against the US dollar and the euro are related to the development of the domestic currency supply and demand that was amplified by the political crisis experienced after the parliamentary elections.

As to the supply, the main elements that influence the exchange rate include the currency inflows from exports and the remittances sent by migrant workers from abroad. Moldova’s exports during the first four months of this year rose by about 8%, while imports almost twice, by 16%. This way, the country’s balance-of-trade deficit increased from about US$ 138 million in January to almost US$ 300 million in April.

The economist said the amounts transferred from abroad through banks decreased by almost 7% in the first five months of this year or by over US$ 34 million. In such conditions, the net supply of currency from private individuals in May grew by only US$3.3 million (+1.6%), while the net demand of currency from business entities – by nearly US$83 million or over 49%.

According to Ion Tornea, the development of the Moldovan leu in the long run depends on fundamental factors. Until this yearend, the currency market will continue to be marked by the decline in money transfers from abroad and by a more accelerated rise in imports. This will put pressure on exchange rate of the leu against the principal foreign currencies.

The fall will not be yet abrupt, but gradual as there are now no objective reasons for the sudden depreciation of the leu, to 18.5-18.7 lei/USD and 20.8-21 lei/EUR, concluded the expert.