The National Bank of Moldova (NBM) slightly increased the level of average annual inflation for 2024 - from 4.7% to 5%, and for 2025 - from 4.5% to 4.6%.
NBM Governor Anca Dragu announced this while presenting the second Inflation Report this year. She noted that the annual inflation rate will remain relatively stable throughout the forecast period. The inflation rate will fluctuate around the target of 5% ±1.5 p.p. and will remain within the set range throughout the forecast horizon. The minimum value of inflation is expected in Q3 2024 (+3.5%), and the maximum - in Q1 2025 (+6.4%). Such dynamics is due to the positive contribution of all inflation components, except for regulated prices in Q2 2024 and fuel prices during 3 quarters, starting from Q3 2025, when they will have a negative impact on the inflation rate. Anca Dragu emphasized that compared to the previous report published in February this year, the forecasts have been raised slightly, by 0.3 p.p. for 2024 and by 0.1 p.p. - for 2025. The increase is attributed to higher aggregate demand through Q2 2025, the impact of seasonality effects in Q2 2025 and Q1 2026, higher global food commodity prices, and the expectation of higher oil prices in international markets throughout the period. At the same time, through Q2 2025, lower "imported" inflation, negative aggregate demand in Q3 2025, and lower natural gas prices relative to the previous forecast will reinforce the upward revision to the inflation outlook. The National Bank's new forecast is based on the assumptions that economic growth in the euro area in 2025 will be higher and inflation will move more slowly towards the European Central Bank's targets; interest rates in the US will decline more slowly; higher oil prices and lower natural gas prices are expected; and international food prices will rise more moderately than in previous years. In the countries of the region, inflation rates are falling rapidly beyond the lower end of the targets, but inflation remains high in some countries, but this may not be related to inflation risks. With the exception of Romania, the annual inflation rates in the countries of Central and Eastern Europe have reached the target values. Governor of the National Bank also specified that various internal and external factors may affect the basic forecast of the National Bank. For example, the intensification of geopolitical pressure in the Middle East and the escalation of the conflict - it may contribute to the growth of prices for energy resources; temporary supply shock on the formation of international prices for food products; vulnerability of prices for locally produced fruits and vegetables due to uncertain weather conditions; dollarization of the economy will have an inflationary impact. Deflationary impact may be caused by a decrease in natural gas prices in the region and their maintenance at a relatively stable level, which, as a consequence, may lead to a decrease in the gas tariff in Moldova; a decrease in the number of consumers who are located in Moldova; budget financing and tax factors. Uncertainty may be caused by monetary policy adjustments; geopolitical configuration after the 2024 elections; uncertainty about the timing and size of tariff increases; the 2024-2025 harvest; banking sector liquidity and possible uncertainties with external financing. // 14.05.2024 - InfoMarket.
