Moldova quells inflation surge, growth path clouded by uncertainties
After enduring the grip of record inflation in 2022, Moldova has staged a remarkable comeback, achieving its lowest inflation rate in two years. In stark contrast to the October 2022 peak of 34.6%, November 2023 closed with a more manageable 5.5%, marking a remarkable 29-point decline within 12 months.
"The inflation plunge is undeniably positive," acknowledges Marin Gospodarenco, a public finance expert from WatchDog.MD. "However, it's crucial to remember that inflation still surpasses the central bank's 5% target, necessitating continued vigilance and policy interventions."
Several factors have contributed to this significant downturn:
- Global energy price stabilisation: The volatility that once plagued global energy markets, a major inflationary driver for Moldova, has subsided, offering relative price stability.
- Easing supply chain disruptions: The pandemic-induced bottlenecks in global supply chains have gradually loosened, facilitating smoother goods flow and moderating price pressures.
- Targeted government policy: The Moldovan government implemented targeted social assistance programs and fiscal measures aimed at curbing inflation and stabilising the economy.
While the declining inflation rate is a welcome relief, concerns remain. "Inflation remains above the central bank's target, necessitating continued efforts to bring it within the desired range," cautions Gospodarenco.
Economic growth forecasts for 2023 paint a slightly subdued picture. The government anticipates growth of around 2%, a figure deemed insufficient by Economy Minister Dumitru Alaiba. "To climb out of the tail end of Europe," Alaiba highlights, "Moldova needs a consistent 8-10% annual growth rate over the next decade."
The International Monetary Fund (IMF) shares a similar 2% growth estimate for 2023, consistent with its earlier April forecast. While a strong agricultural year has contributed to this modest growth, other sectors struggle with weak domestic and external demand, further complicated by the uncertainty surrounding the ongoing war in Ukraine.
"2023 marks the first year in two decades where economic growth won't be enough to offset losses from the previous year's recession," emphasises Adrian Lupusor, Executive Director of the Expert-Grup Independent Analytical Center. He predicts a further slowdown in 2024, potentially dipping to 2.6%, due to persistent weak demand and heightened uncertainty.
Moldova's inflation victory is a noteworthy achievement, but the journey towards complete economic recovery remains long and arduous. Navigating through persistent domestic and external headwinds will require meticulous monitoring, effective policy interventions, and diversification of economic activity. By tackling these challenges with foresight and determination, Moldova can unlock its full economic potential and navigate towards a future of sustainable growth.
Translation by Iurie Tataru
