BASE RATE LOWERING IN DECEMBER ALLOWED NBM TO ANTICIPATE PRICE GROWTH IN 2020

The regulator forecasts the consumption price index lowering during next two years (2020-2021), said National Bank of Moldova President Octavian Armasu in an interview to the “Banks & Finances” Magazine.

“The inflation will start falling due to several reasons. First of all, the impulse is not the same as it was in 2019. I mean not all the state budget expenditures, but only some elements of the expenditure component, which affect the prices: salaries to public workers, state social programs, pensions, allowances, as well as the tax reform, within which the taxes on salary fell to 18% from 13%”, the banker said.

According to the NBM President, all this taken together led to growth of people’s revenues they can freely manage.

“Respectively, this led to the consumption growth. There are no reasons to expect for an equivalent consumption growth in 2020, as it is difficult to suppose that the tax rate will continue falling. This says that there will no more be such a tangible pressure on inflation”, Armasu said.

Speaking about external factors, which influence the inflation, the banker pointed at the fact that Moldova’s main trade partners register growth slowdown.

“This means that we will witness the lowering of exports, imports, remittances from labor migrants, which will affect the inflation, forming a disinflation pressure on prices”, he said.

The NBM president also cited the international forecasts, which demonstrate that no considerable growth of petroleum product prices is expected in 2020.

“Their price is expected to be quite smooth, which is also an important component for calculating inflation in Moldova. Given the fact that the natural gas procurement price will also fall, we do not expect great changes of the regulated tariffs for energy resources – gas, electricity, heating, water supply. If we put all these factors together, we will get quite a low inflation in 2020”, said Armasu.