The consumer price inflation in Moldova (chart) eased to 3.5% year on year in April from 3.9% y/y in March, particularly dragged down by the prices of utilities (electricity, gas, heating) that plunged by 24% y/y on average, according to data published by the statistics bureau. It thus hit the lower end of the target band.

After it peaked above 30% y/y in 2022 on high energy prices, Moldova's inflation plunged below the central bank's target, being replaced by subdued growth (+0.7% in 2023) as the main concern on authorities' agenda. The central bank recently shared the same concerns taking an expansionist stance with a new rate cut.

Under the updated projection to be released by the National Bank of Moldova (BNM) on May 14, the inflation forecast was raised slightly for the entire forecast period, with few exceptions. According to the latest forecast round, the average annual inflation rate will still remain below the 5% central target: 4.7% in 2024 and 4.5% in 2025.

Moldova’s monetary authority cut the monetary policy rate by 0.15 percentage points (pp) to 3.6% at its May 7 board meeting – a small step after the policy rate was lowered by some 1pp per month since December 2022, but significant given the already doveish rate.

The trajectory of overall consumer prices and headline inflation in Moldova is particularly influenced by the regulated sector of utilities where the prices are subsidised during the winter. 

In April 2024, utilities’ prices rose by 8.6% month on month (contributing to the 1.8% m/m monthly inflation – half of the inflation over the past year) as the subsidies were lifted. But even so, the utilities’ prices remained in April 2024 significantly below their level in April 2023 (-24% y/y). Both natural gas and electricity prices are subject to upward risks given their historic low levels (cheap electricity supplied by Transnistria and low gas prices across the whole of Europe).

Specifically, the end-user price paid by households for natural gas has particularly halved from April 2023 while the end-user price of electricity contracted by 24% y/y.

The central heating price also dropped by 40% y/y in April.

Overall, the price of services (including the utilities) dropped by only 2.4% y/y in April as the cost of other services surged: +26% y/y for the transport services or +39% y/y for tourism services.

Food prices increased by only 3.8% y/y thanks to the subdued prices of some items (vegetable oil, sugar).

The prices of non-food items (including car fuels) rose nearly twice as fast, by 7.0% y/y.