logo

Our economy is weaker than those in region and depreciation of leu is inevitable, expert


https://www.ipn.md/index.php/en/our-economy-is-weaker-than-those-in-region-and-depreciation-of-leu-is-inevitable-7978_1022557.html

Economist of the Institute for Development and Social Initiatives “Viitorul” Sergiu Gaibu said the Moldovan economy is in principle weaker than the economies in the region and the depreciation of the leu is inevitable, whether we want it or not. In an interview for Radio Free Europe, quoted by IPN, the expert said the general trend is a depreciative one and, if the leu depreciates slowly, as now, it’s not something volatile as at the beginning of this year and there is no tragedy in fact.

“If we analyze the objective side of the factors that influence now the currency market, which are the inflow and outflow of currency in the national economy, we see that the exports decreased and the remittances decreased, but the imports also declined. Thus, the discrepancy between supply and demand this year, at least in summer, wasn’t different from the discrepancy in 2014 or 2013. So, there is no objective reason in the real economy for massive fluctuations, at least in the given period,” stated the economist.

However, things can worsen towards this yearend. The discrepancy could deviate and increase much more than the previous years. This can lead to an increase in the exchange rate, as many experts anticipated, said Sergiu Gaibu.

“The depreciation as a trend is ok. What happens now is not something alarming. We must yet admit that neither the National Bank nor another public authority is able to stop this trend. But the National Bank can and should stop the volatility of the exchange rate. A development similar to that of the start of this year, when the leu increased in value by 5 lei and then depreciated by 4 lei should be prevented and stopped,” stated Sergiu Gaibu.

According to him, these are unfavorable speculations for the country’s economy, which cause panic among the population and affect the businesses, which are now in an uncertain economic situation. “This uncertainty is absolutely normal. Any business does this. The uncertainty is included in the price as it represents a cost for the business. The foreign currency is now bought at a certain price for paying for something abroad or elsewhere, but in two days the exchange rate can rise or fall considerably,” said the expert, adding there were cases when losses were sustained and this uncertainty causes in fact price rises, which is more serious in some situations than a slow depreciation.