The National Bank of Moldova is trying to control the deprecation of the leu, looking for a balance where the leu will feel comfortable. Over the last few months, the national currency has depreciated by 30% against the main foreign currencies – the euro and the dollar. If it continues to depreciate, the prices will grow further, economic expert Veaceslav Ionita said, when asked by IPN to comment on the situation on the currency market.
“I anticipate that the prices this year will rise by 20% on average. The key factor is the depreciation of the national currency. We should not mix up last week’s speculations in currency with the depreciation of the national currency. During the last few months, the leu has depreciated constantly, by 30-35% against the euro and dollar. I think this depreciation will continue and, if it continues, the prices will increase further,” said the expert.
The prices of the imported products will be the first to rise, followed by those of the national products. “Some wonder why the prices of the national products grow if the producers import nothing. The answer is that when life grows dearer the costs for the consumption of national products increase. The prices of national products will rise by 5-10%, while of imported products - by 20% on average,” projected Veaceslav Ionita.
The risk of price rises appeared several months ago and the currency shock of last week acted like a catalyst. “The economic entities increased the prices to offset the lack of incomes during the last few months. The price increase was exaggerated. If the currency market becomes predictable, the prices will be adjusted and reduced slightly. The lower consumption will determine a price rise. If the sales decrease, the companies will raise prices in order to survive. We entered a vicious circle – the price rise will reduce consumption, while the lower consumption will lead to a rise in prices,” said the expert.
Veaceslav Ionita considers the central bank’s intervention to control the depreciation of the national currency is correct as it must prevent panic like that witnessed last week.
