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Moldovan leu needs slight depreciation, expert


https://www.ipn.md/en/moldovan-leu-needs-slight-depreciation-expert-7966_1102306.html

Remittances from abroad have lost their economic impact, reaching the lowest level in the last 25 years. Even so, in 2023 the foreign exchange market was strongly influenced by the large supply of currency, including with the contribution of Ukrainian citizens who sold large volumes of currency, said Veaceslav Ioniță, economic policies expert of the Institute for Development and Social Initiatives “Viitorul”. According to him, in 2024 the foreign exchange market most likely will not be pressured so much by the appreciation of the leu and the leu needs depreciation, IPN reports.

“In 2023 we had the largest sales of foreign currency in the history of Moldova, the largest net sale of foreign currency in the last 10 years, amid the decrease in remittances. So, remittances have declined, while net sales of foreign currency have increased. The only logical explanation is that, in addition to the remittances of our citizens, in addition to the savings they have at home, the third factor unknown to us is involved. I assume this is it – the citizens of Ukraine,” said the economist.

According to him, this year there is a slight possibility that the foreign exchange market will not be pressured so much by the appreciation of the leu, and the National Bank of Moldova will no longer have to take intervention decisions. In his view, the leu needs depreciation.

“It is not good for a poor country of Europe for eight years to have a currency that is by 10% stronger. It does not show our strength, but, on the contrary, our weakness. Therefore, my recommendation is for us to be more active on the foreign exchange market, all the more the context is favorable, so as not to allow further appreciation of the leu. Moreover, we should even encourage slight depreciation of the leu, at the psychological threshold, so as not to stress anyone,” said Veaceslav Ioniță.

The expert noted that there are no risks of price increases. According to him, a strong leu is favorable for inflation to be low and the population to be happy, but it kills the national economy.

“I think the risk of inflation is gone. That’s why we need to make every effort, including to slightly weaken the leu, so as to allow the business community to feel more comfortable, because it really suffers a lot,” said the economist.