At the beginning of 2021, inflation started to increase in the Republic of Moldova, primarily owing to supply shocks, especially in relation to the import prices of fuel, food and others. Starting with April and May, the rise in the consumer price index (CPI) has been also supported by the pressure exerted by the internal aggregate demand, National Bank governor Octavian Armașu said when presenting inflation repot No. 3 for 2021, IPN reports.

The governor noted the annual inflation rate rose from 1.49% in March 2021 to 3.16% in June. Except for the regulated prices, all the components of the consumer price index have increased. The food products contributed essentially to CPI owing to the drought of 2020, as did the basic inflation that grew the past few months due primarily to the simulative monetary conditions implemented by NBM.

“If we compared the prices of food products in the Republic of Moldova with the international ones, we see a powerful correlation between them, which means that the market in Moldova, being supplied more with imported products following the drought of 2020, was powerfully influenced by external prices,” stated Octavian Armașu.

According to the governor, the fuel prices also influenced CPI. There is a considerable correlation between the prices on stock exchanges and the prices on the domestic market.

Octavian Armașu noted that both the internal demand and supply are recovering. In the first quarter of this year, the aggregate demand represented 2.8%, as the supply, which is actually the Gross Domestic Product. The sources of financing the internal demand rose by about 9.5 % due to the increase in the salary fund and lending for consumption.

The governor also said that the annual rate of the basic inflation will follow an upward trend until the first half of next year and will then decline. The annual growth rate of regulated prices will increase noticeably to high levels until the middle of next year and will then decrease.