Annual inflation down nearly 3pp in Moldova to 27.3%

Annual inflation down nearly 3pp in Moldova to 27.3%
/ bne IntelliNews
By bne IntelliNews February 13, 2023

Consumer prices increased by less than 0.5% in January in Moldova and the headline inflation eased by nearly 3 percentage points (pp) to 27.3%, the statistics bureau announced. Headline inflation dropped for the third month in a row in Moldova, after it peaked at 34.6% y/y in October.

The release was published after the National Bank of Moldova (BNM) slashed the key rate by 3pp to 17%, announcing expectations for quick disinflation throughout this year and hopes for the annual inflation to enter the target band (5% +/-1.5pp) in the second quarter of 2024. It was the second rate cut after BNM hiked the key rate at 21.5% in August to fight rampant inflation.

Both food prices and non-food prices began to lose momentum in August but energy prices kept rising for a couple more months until the government reached an agreement with Transnistria to get electricity at more affordable prices in exchange for passing to the separatist region the entire amounts of natural gas received by Moldova from Gazprom.

In January, the end-user price of electricity dropped by 33.5% m/m and made a significant contribution (nearly 1pp) to the overall disinflation, although it was still 78% up y/y. The price of natural gas, however, kept rising, by 17.6% m/m in January, as Moldovagas distributed to end-users the gas purchased at a high price by state-owned energy trader Energocom from Europe.

Overall, the price of services (which includes energy in Moldova) edged down by 0.69% m/m in January but are still nearly 39% up y/y.

Food prices maintained a moderate advance of 1.1% y/y in January and their annual increase 9+28.6% y/y) is just above the overall inflation.

The prices of non-food food goods lag behind the average inflation with an 18.4% y/y advance, dragged down by households’ diminishing budgets.