The downward trend followed by the annual rate of inflation at the end of the previous year continued in second quarter of this year. This way, the annual rate of inflation decreased from 22% in March to 13.2% in June, IPN reports.
The National Bank of Moldova said the effective annual inflation in the second quarter was by 0.2 percentage points higher than the forecast level, the deviation being principally caused by the food prices as a result of the larger than expected rise in fruit and potato prices due to the meteorological conditions this spring.
“The current inflation rate of the Consumer Price Index above the upper limit of the interval of ± 1.5 percentage points from the target of 5% reflects the effect of the pronounced inflationary pressure the previous year, associated with the rise in tariffs of regulated services, their secondary effects, the war in Ukraine, the drought of last summer. At the same time, additional inflationary pressure in the first half of this year was caused by the colder weather in the spring of 2023 and the rise in excise duties at the beginning of the year. The disinflationary demand starting with the middle of 2022 and the appreciation of the leu continue to alleviate the pressure of the mentioned factors,” the central bank noted in a press release.
It said that the economic activity declined in a pronounced way at the start of the current year, the annual rate of inflation in real terms of the GDP being negative, of 2.4% in the first quarter of this year. This fact was influenced by the reduced domestic demand following the decline in the population’s real incomes and the more restrictive conditions for lending, the rise in energy prices and the increased uncertainty in the region. As regards demand, the consumption of the public administration and investments grew, while the population’s consumption, exports and imports decreased. From the perspective of the supply, the agriculture, industry and the building sector contacted, while the healthcare and social assistance, real estate and information and communications sectors developed positively.
The current forecast is based on reduced external demand and connation of the tempering of the inflationary pressure. The quotations of energy resources and food products on the international market stabilized the past few months, but the supply shocks in the average and long terms could contribute to restoring the upward trend of these.
Throughout the forecast period, aggregate demand will be under the potential, being influenced by the less restrictive and diminishing character of the real monetary conditions and the negative impact of the external demand. Simultaneously, the positive fiscal impact will support domestic demand to a particular extent, except for the last two forecast quarters.
“The forecast risks and uncertainty are high, but the balance of risks remains disinflationary. From the external environment, supply shocks caused by the war in Ukraine, the moment of relaxation of the monetary policy in the region and globally, the quotations of energy resources and other raw materials can persist. Among the main internal incertitudes are the supply with the necessary energy resources and their prices, the adjustment of tariffs, the flow of refugees, the weather conditions and the agricultural production this year and next year,” said the central bank.
