Moldovan national currency records sharpest depreciation of last years, experts say

Chisinau, 1 July /MOLDPRES/ - The Moldovan leu witnessed the biggest depreciation, of 5.3 per cent, against the currency basket Euro and U.S. dollar in the last four years during the second quarter of 2019, an economist of the Viitorul Institute, Veaceslav Ionita, has said. On this period, the national currency hit the thresholds of 18 lei for one dollar and 20 lei for one euro.    

The Moldovan leu depreciated by 4.8 per cent against the dollar and - by 5.7 per cent against the euro. According to Ionita, this was triggered, in particular, by the increase in the demand of currency on behalf of economic agents. Thus, in the last 1.5 years, the annual demand of currency grew by 570 million dollars and reached 2.2 billion dollars/annually. At the same time, the supply of currency increased much more slowly and is presently at the level of 2.090 billion dollars/annually.       

„While one year ago, the annual surplus on the currency market was of 370 million dollars, then at present, we have an annual deficit of more than 130 million dollars. This deficit grew on the eve of the elections, when during three months alone, - December 2-018 – February 2019, the demand of currency was by 240 million dollars higher than the supply. Earlier, I have said that our currency market is strongly influenced by the political cycles, due to the fact that economic agents on the eve of the polls prefer to tighten the security of their savings in currency,” Veaceslav Ionita wrote in a posting on his blog.    

The expert also said that another factor which triggered the increase in the currency demand is the residents’ consumption non-covered by incomes. “Put simply, the consumption credits, which amounted to 1.7 billion lei on the period January 2018 – May 2019, mostly went to the currency market, creating a deficit of currency. Yet, the currency shocks from last April and late May were caused by the artificial maintenance of the Moldovan leu’s exchange rate on the eve of the elections. In December 2018 – February 2019, when the highest deficit of currency was recorded, the Moldovan leu, instead of depreciation, witnessed even an appreciation. It is very hard to economically reason this excessive intervention by the National Bank of Moldova; it is sure that, after the polls, we faced sharp depreciations, which should not take place,” Ionita noted.       

At present, the increase in the currency demand has tempered; the supply remains high; there is a high probability of additional currency entries in form of grants and governmental loans, which will calm the currency market, experts say.   

According to experts, on the months to come, the Moldovan leu will have a stable fluctuation, with a slight inclination towards depreciation against the currency basket Euro&Dollar. At the same time, in next August, the national currency traditionally witnesses a slight appreciation, triggered by residents’ massive sales of currency.