The war in Ukraine and the crisis in the region, difficulties with energy supplies, unclear prospects for prices and the harvest of agricultural products in 2023 are factors of uncertainty in forecasting inflation.
This is stated in the Inflation Report presented the day before by the National Bank of Moldova. On the external sector side, uncertainty remains regarding the development of the conflict in Ukraine, as well as the depth of the economic crisis in the region and its impact on economic activity, social security, trade stabilization and price formation. Inflationary factors will be further strengthening of the USD, which will lead to higher prices for imports and domestic prices. Energy prices will remain high, including in the context of the EU embargo on imports of oil and derivatives from Russia, introduced in December, which will limit the supply of these products in the region and lead to higher prices. In the context of shortages, there is a risk of buying energy resources at higher prices, which could lead to higher tariffs. Uncertainty also comes in the context of sovereign debt crisis - amid galloping inflation, interest payments on loans obtained over the last 2-3 years to offset the downturn in economic activity will become more expensive. The prospects for a decline in global demand remain unclear. As for the real sector of the economy, uncertainties remain regarding the supply of the necessary amount of electricity and its cost, and accordingly, the possible growth of tariffs. There are also uncertainties related to the timing and size of increases in regulated tariffs, which have not only an economic, but also a social impact. It is still unclear how the National Bureau of Statistics will reflect the compensation provided during the cold period of the year. The military conflict in Ukraine is not only a factor of uncertainty, but also creates additional inflationary pressure. For example, the growth of inflation is affected by replacement of Ukrainian goods, which were previously present in the market, with more expensive products from other countries; economic agents are forced to look for alternative routes for foreign economic transactions and find new suppliers. At the same time, the presence of a large number of Ukrainian refugees supports domestic demand, while their return home will reduce the number of consumers and demand in the domestic market. In the agricultural sector, the risk of unfavorable weather conditions remains, which may influence price increases and the overall crop forecast in 2023. As for the monetary and public sectors, depreciation of the national currency against the USD, planned increases in public sector wages and pensions and energy compensations may be the factors of inflationary pressure. At the same time, uncertainties are related to the appreciation of the MDL against the EUR, the stability of the financial sector and financial stability in general during the economic crisis, the volume of external financing. Also the parameters of the budget and fiscal policy for 2023 are not clear yet, which makes it impossible to analyze the impact of new measures on the economy and the parameters of inflation. // 16.11.2022 – InfoMarket
