Inflation wave reaches Moldova’s relatively closed economy

Inflation wave reaches Moldova’s relatively closed economy
By bne IntelliNews July 13, 2021

Consumer price inflation in Moldova has inched up to 3.2% year on year in June from 3.1% in May, a small shift that apparently poses no major concerns in terms of acceleration or with regard to the level of inflation.

From a broader perspective, Moldova’s inflation has slowed down from the shock that followed the bank frauds in 2015 that were addressed by the central bank with extremely tight monetary policy.

But there are signs that Moldova’s economy, as small and relatively closed as it is, will not remain untouched by the inflationary wave.

First, utility prices can not be kept under control indefinitely. The fuel price, regulated under a controversial bill criticised by President Maia Sandu, already resulted in smaller imports and the regulations will eventually be amended, leaving the price to increase. The currency depreciation will also surface in consumer prices.

As of June, the prices of non-food goods accelerated to 5.1% y/y, the highest level since early 2016. The prices of construction materials rose by 11% y/y, of fuels by 18% y/y (despite the regulations) and of automobiles by 12% y/y (reflecting the currency depreciation).