The economic year 2018 was marked by the overlapping of positive economic tendencies that were rather shallow ones with negative tendencies. This points to the appearance of profound development constraints. This way, even if a constant economic growth of about 4% was seen, accompanied by an essential inflationist moderation and even slight reinvigoration of the private investment activity, the recovery pace is yet small against the low comparison basis, says a new edition of the “Economic Reality” produced by experts of the Independent Think Tank “Expert-Grup”, IPN reports.
According to the authors, the informal employment continues to grow and the agricultural sector, which is the most important employer in the country, stagnates. This points to the low quality of the economic growth and the limited impact of this on the improvement of the quality of life. Even if the reforms in the financial-banking sector were stepped up, the financial intermediation level continues to decline and the banks are more interested in lending to the state than to the real sector.
Despite the stabilization of public finances amid the rise in the amounts collected into the budget, the fiscal reform and the infrastructure projects financed with public funds will essentially weaken the Government’s financial position and the budget deficit could grow considerably in 2019, with negative repercussions for the economic growth.
The erosion of the framework for fighting money laundering is the most worrisome tendency witnessed in 2018. This affected further the Government’s relations with the development partners. This is related to the law on voluntary declaration and fiscal stimulation and the law on Moldovan citizenship by investment adopted in 2018 despite multiple concerns expressed by civil society and the development partners. Their content runs counter to the spirit of the Association Agreement with the EU and the Memorandum with the IMF.
The experts noted the government in 2019 should take into account a series of imminent challenges. 2019 will be marked by parliamentary and local elections that could destabilize the system of public finances owing to the multiple electoral policies with a negative budgetary impact initiated in 2018, both at central and local levels.
Another challenges is related to the improvement of the relations with the development partners, especially the restoration of the financial relations with the EU and implementation of the Memorandum with the IMF. The government should accelerate the undertaken basic reforms and should not allow departures from the provisions, especially from the spirit of the Association Agreement with the EU.
According to “Expert-Grup”, the utilization of the possibilities offered by the Deep and Comprehensive Free Trade Agreement is a positive tendency seen in 2018, which should be maintained in 2019. Trade with the EU grew constantly and in a balanced way, fully offsetting the losses on the CIS market and generating real jobs, budget revenues, investments and, in general, economic growth. In 2019, the authorities should make maximum effort to keep the positive tendency, including by solving the problem of access of vegetable and animal products.
