Oleg Tofilat: Unprofessional management of the economic situation could affect the country's development vector
From economic viewpoint, we will go through a difficult period, which requires professional management and effective communication from the Government, warns economic expert Oleg Tofilat. "It is a difficult situation, which must be managed professionally and must not become fatal for the country's economy and development vector," he said in the ÎN CONTEXT program on Moldova 1 TV.
"Prices and inflation result from several factors. For example, due to tariffs on energy resources and inflationary expectations, prices may increase. These will lead to unpleasant situations or to the devaluation of money, which comes with the increase in interest rates and we risk entering a spiral. There is also a budget deficit of 14 billion, which did not anticipate the economic crisis. In addition, we have problems related to the budgets of public institutions, which will have to pay several times more for electricity and heating. This was not foreseen in the budget adopted by Parliament."
According to the expert, many companies are dependent on energy resources and will have to increase prices for products or services. "There are enterprises that depend heavily on the energy component and that produce meat, milk, eggs and other products from the minimum consumption basket, for which, even if we admit that we compensate them, prices will not increase much, although this is very debatable. But what about enterprises that have an energy component, but which is not critical? For example, in 2023, the Railway paid approximately 30 million lei for electricity per year. Its increase or doubling adds 30 million to the budget. Likewise, there are many other enterprises where a large part of the budget is related to electricity. Not to mention small businesses, such as Horeca, beauty salons, barbershops that consume a lot for heating and electricity. They will have to adjust prices, because otherwise they will not survive.”
Oleg Tofilat anticipates a difficult situation for the economy, which must be managed professionally and through very effective communication from the Government. “It is a bundle of problems that is very difficult to solve and that must not become fatal for the country’s economy, but also for the development vector. I recommend that citizens have liquidity reserves to be able to deal with unforeseen situations and save electricity as much as possible.”
The almost twofold increase in the price of electricity puts significant pressure on producers, fueling fears about rising food prices. Sellers and buyers already feel the impact of seasonal price increases. The Ministry of Economy has proposed compensating energy tariffs for the business environment, producers of milk, meat, eggs, bread, footwear, clothing, furniture, and electrical components. For now, it is not clear how this mechanism will work.
The year 2024 ended with inflation below seven percent. Last week, the National Bank increased the base rate by two percentage points, to 5.6 percent, to control price increases.
