Remittances to Moldovan households grow strongly in August

Remittances to Moldovan households grow strongly in August
By Iulian Ernst in Bucharest September 29, 2017

Gross transfers from abroad to Moldovan households increased by 10% y/y to $96mn in August, the central bank announced. The gross inflows in January-August increased by the same rate to $695mn. However, in the rolling 12 months ending August, the transfers increased by only 4.8% y/y to $1.22bn.

The volume and the origin of the remittances are likely to have an impact on public sentiment in the context of the dispute regarding the country’s political and economic orientation towards the European Union versus Russia’s Eurasian Economic Union project.

The inflows denominated in euros (from EU countries) increased particularly strongly (by 23% y/y to €46mn in August), while those expressed in US dollars or rubles (from Russia) remained constant or decreased. Inflows denominated in rubles decreased by 14% y/y to $9.4mn in August and those denominated in US dollars contracted by 9% y/y to $22.7mn in the same month. 

The recovery in the inflows, after they narrowed in 2015 amid sanctions imposed by Russia on Moldovan workers and an economic slowdown in the CIS countries, has an impact on the exchange rate. On the one hand, the strong local currency helps the central bank fight inflation, but on the other hand exporters lose the stimulus that helped them gain ground in 2016. 

Local producers’ failure to capitalise on the rise in consumption prompted by households’ higher disposable incomes will result in wider budget deficits. Import growth already accelerated to 26% y/y (expressed in US dollars) in July, while exports advanced by only 16% y/y.

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