Page 54 - SE Outlook Regions 2023

2.6.3 Inflation and monetary policy

Moldova’s inflation peaked at nearly 35% y/y in the autumn of 2022,
amid a combination of high energy prices and rising food prices.

Moldova’s consumer price inflation eased to 31.4% y/y in November
2022 from 34.6% y/y in October, after prices advanced by only 1% in
the month, preparing the ground for more monetary relaxation.

The National Bank of Moldova (BNM) decided on December 5 to cut
the monetary policy rate by 1.5pp to 20%, after the annual inflation rate
came in slightly below expectations in October.

The central bank said that the monetary policy relaxation will continue if
future inflation data confirm its expectations.

The inflation outlook in Moldova has recently improved after inflation
peaked above 34% y/y in August-October, driven by high energy prices
and weak agricultural production. Furthermore, the economic slowdown
towards the end of the year is easing demand-side pressures and
encouraging the central bank towards milder policies. The government
hopes for a 2% GDP recovery in 2023 and the monetary authority is
likely to be supportive in this regard for a variety of reasons.

The government avoided another electricity price hike in December by
reaching an agreement with the separatist Transnistria region and at
this moment the natural gas price is not under pressure so the
disinflation may continue in the last month of the year as well.

The BNM decided to cut the monetary policy rate by 1.5pp to 20% on
December 5, in response to lower inflation.

The BNM made the cut after the annual inflation rate came in slightly
below expectations in October. The central bank said that the monetary
policy relaxation will continue if future inflation data confirm its
expectations.

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