Deflation is an undesirable phenomenon with negative consequences for the economy as a whole - Anca Dragu
Governor of the National Bank of Moldova (NBM) said this during the next edition of the new series of the podcasts “Give Sense to Money”, which are held at the initiative of the NBM with the support of the USAID program “Moldova Institutional and Structural Reforms Activity” to provide citizens with more detailed information on financial and economic topics. The podcast was dedicated to inflation issues. Anca Dragu reminded that inflation is an increase in prices and a decrease in prices is deflation. “A decrease in price growth rates is disinflation. Let's say a product costs 100 lei. If we have 10 percent inflation, it will cost 110 lei. If we have 10 percent deflation, it will cost 90 lei. Thus, the price goes down. But if we have 5% inflation, it will be disinflation. That is, the goods will go up in price not by 10 lei, but by 5 lei,” said the head of the National Bank. She emphasized that deflation is a negative phenomenon. “People want to reduce prices. But we actually want to reduce the rate of price growth. There should be a certain level of price growth. So, if I know I need a mug, why should I buy it today for 100 lei if I can wait six months and buy it for 90 lei? And the person who made the mug, what is supposed to do? Stay with it, close the company, fire people? Unemployment will appear,” Anca Dragu said. The NBM Governor emphasized that, thus, deflation, the decrease in prices, is an undesirable, negative phenomenon with negative consequences for the economy as a whole. “But yes, we want disinflation. That is, we wanted prices to increase not by 34.6%, as in October 2022, when, for example, this cup should have cost 135 lei, but to increase by 5%. That is, to increase its price from 100 to 105 lei. Year after year, we want it to be 105 lei per year, but we don't want it to be 135 lei. There is a very high inflation, which, in fact, affects our purchasing power, changes the behavior of the consumer, of companies. We hear people very often saying that prices should go down. They want prices not to go up so much; they want them to go up a bit. As I said, we put some salt in our food, and not even in all food, we don't put salt in ice cream,” Anca Dragu noted. //26.11.2024 – InfoMarket.
