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This time again, consumption fueled the economic growth - which is not exactly a bad thing. Only in this case, the pace of credit growth, especially the consumption one, runs counter to economy's ability to promptly react to surging demand, and therefore massive imports shake the trade balance. Areas which should be boosted by credits, namely manufacturing, are very slow.

At the same time, evolution of oil price on the international markets, which hit a record high level skyrocketed the oil prices on the Moldovan market. As it is included in production costs of many consumer goods, surging oil prices pose a threat for the economic growth that consequently might cause a downturn in the economic growth. Furthermore, trade deficit that reached 600 million USD over January - July 2005, record high since 1001, might also influence the economic growth.

Flagging profit margins of the exporters - due to rising production costs, fuel price and appreciation of the national currency - coupled with dropping investments in exporting industry, might set the budget deficit to soar exceeding 30% of the GDP by the end of the year, i.e. go over 1 billion USD. Under those circumstances, one may well expect an outflow of foreign capital and Leu depreciation. This is only a scenario, however it should not be ruled out.

Nevertheless, statistically speaking this year might as well report high economic growth; but let's better wait until the end of the year.

As for inflation, it registered 3.7% over January - August, perfectly falling within the Government 8-10% forecast. However, one should not forget about the deflation registered over the summer, traditional for that period of the year. The prices on food have dropped thanks to the good harvest this year and great supply as Russia banned the import of fruits, vegetables and meat from Moldova.

Still, this year is different, especially because of skyrocketed oil prices. It is also expected that prices on natural gas will rise, especially after so many declarations made by the Russian officials in this respect. Accordingly, inflation is set to soar. If this happens, it would be largely due to skyrocketed prices on fuel, electricity and high production costs.

Firstly, heating price would be likely adjusted (raised) to the rising oil prices once it is supplied to the consumers. This adjustment would be definitely recorded by the statistics. Rising oil prices are also likely to set the electricity price to soar. Moldelectrica already announced that it would raise the price for transporting energy.

Oil price fluctuations on the international market is yet another cause of concern when it comes to inflation rate. And this largely due to the fact that oil price is reflected in all the prices considered when estimating inflation rate. It is known-for-a-fact that domestic prices adjust faster to the international prices, than the domestic salaries do.

Furthermore, rising production costs, fueled by growing salaries, might also shape inflation. For the National Bank seeking to ensure the price stability the situation is not exactly favorable.

Having said that, the economy would slow down, especially if there would be other unfavorable circumstances to come.