National bank of Moldova lowers inflation rate forecast for 2019

Chisinau, 07 August /MOLDPRES/ – The National Bank of Moldova (BNM) has lowered the inflation rate forecast for 2019, to 5.0 per cent, compared to 5.1 per cent as forecast in Inflation Report №02. The forecasts for 2020 were increased from 6.5 to 6.7 per cent, according to Inflation Report №03, presented by BNM, on Wednesday, 07 August.

The BNM notes that the annual inflation rate will increase by the end of this year and will reach the maximum level of 8.0 per cent in the fourth quarter of 2019, after which it will decrease continuously until the end of the forecast horizon, when it will lower to the minimum level of 3.9 per cent, in the second quarter 2021. During the first quarter forecast, the inflation will be within the range of ±1.5 percentage points of the inflation target of 5 per cent. Starting with the fourth quarter of 2019, it will rise above the upper limit of the range.

The annual rate of increase in food prices will increase significantly until the end of 2019, and then decrease towards the end of the forecast horizon. The annual rate of growth of regulated prices will increase sharply in the first two quarters of the forecast and will decrease slightly in the fourth quarter of 2020. Subsequently, it will remain at a constant level. The annual rate of increase in fuel prices will be relatively stable, fluctuating insignificantly at rather low levels, as noted in Inflation Report.

The annual rate of inflation in Moldova decreased in 2018 to 0.9 per cent, well below the level recorded in the previous year when the consumer price index was 7.3 per cent.

In the second quarter of 2019, the annual rate of inflation continued its upward trend from the beginning of 2019, increasing from 2.8 per cent in March to 4.4 per cent in June. This evolution was supported by some pressures from food prices, depreciation of the national currency (MDL), as well as some pressures from the aggregate demand. Starting with May 2019, the annual CPI rate was within the inflation target range.

The BNM estimates that the average annual inflation rate in the second quarter of 2019 "was slightly higher than anticipated, confirming the main assumptions and conclusions related to forecast round of April 2019".