Head of NBM on Inflation: We Have Had a Lot of Unreasonably Low Prices

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The structure of our economy, its dependence on the economies of Ukraine, Russia and Belarus, the lack of our own energy resources as well as the unreasonably low regulated prices make the inflation in Moldova so high. That was the explanation given by NBM Governor Octavian Armasu, who added that the Baltic States, as well as neighboring states, will soon “catch up with us”, Unimedia reported. “Why is inflation so high, given the regional level, and how long will this trend last? If we talk about annual inflation, we do have an inflation rate that reached 34.3% at the end of August. This is quite a high figure, but if we talk about the growth rate of this inflation, we will not be the leaders in the area. We can see that there are other countries in the region, the Baltic States, and neighboring countries that have a faster inflation rate, and they will catch up with us. But we must also look for the answer in the structure of our economy, in how energy security is ensured, what energy resources we have. Even countries with no natural resources of their own have alternative energy sources, wind energy and green energy, largely offsetting for these energy shocks. We are also a small, open country, and, given that our economy is small, the spread of external shocks is much faster here than in larger economies. And last but not least, before these inflationary shocks, we have had many unreasonably low regulated prices, which were artificially low. Now we cannot keep them at the same level anymore, they are being adjusted, and this rate is very large, given the external shocks. As a final factor, we must not forget the connection of our economy with the economy of Ukraine, Russia and Belarus as a whole,” concluded Armasu.