Moldova's GDP growth in 2022 will drop to 0.3% amid the war in Ukraine and sanctions against Russia and Belarus and the average inflation rate will rise to 23.5% - the IMF.
This is stated in the materials of the International Monetary Fund, published after the IMF Executive Board completed an extraordinary evaluation of the program implementation with Moldova and approved an increase of $260.11 million to $795.72 million for Moldova under the current program. Fund experts note that the secondary effects of the war in Ukraine will affect the Moldovan economy in a number of channels in the short and medium term: trade disruption will lead to a decline in net exports, adverse effects for certain remittances could also be affected, although the consequences are unknown at this point. The IMF expects that high energy costs, in particular higher gas tariffs, combined with expected food price increases and related uncertainties, will also have a negative impact on aggregate demand. In the medium term, economic growth in Moldova is expected to strengthen to about 5% on average, due to large-scale program reforms, including additional financial support envisaged to meet Moldova's development needs. The IMF experts also note that due to growing food prices, adjustments of energy tariffs and unsatisfied demand, inflation accelerated to 22.2% on annualized basis in March, which is much higher than both the target range of the NBM and the range of consultations within the program. Fund analysts state that the war in Ukraine is also putting pressure on the MDL, which has depreciated significantly since the conflict escalated, and disrupted transit will put pressure on domestic prices. As noted, recent developments in the gas market have further complicated the picture due to significant tariff adjustments affecting regulated prices, while anticipated lower purchasing power and emerging uncertainty could reduce aggregate demand and core inflation. Average inflation is projected to rise to an annualized 23.5 percent in 2022 and then decline to the inflation target at the end of 2023 and over the medium term. The Fund's experts note that inflation in Moldova is likely to peak in the summer and then decrease by the end of the year and in 2023, assuming that commodity prices should begin to partially normalize in the second half of 2022. Food price pressures are also expected to decrease as trade disruptions are eliminated and alternative sources of supply are identified. // 17.05.2022 - InfoMarket
