Moldova in 2013 witnessed a record GDP growth of 8.9%, but this growth is fragile and will not have continuity. The country completed the ‘easy’ reforms stage and now needs structural and institutional reforms to reduce the discrepancy between the living standards in Moldova and those in the countries of the region, says the State of the Nation Report 2014 presented by the Independent Analytical Center “Expert-Grup” within the international conference “MACRO 2014”, IPN reports.
Report co-author Adrian Lupusor explained that the economic growth was partially due to the growth in agriculture that recovered after last year’s drought and the depreciation of the leu. According to him, these factors cannot be replaced and the economic growth will be affected by the decline in exports and consumption and the amorphous investment activity. Other factors that undermine the economic growth in Moldova are related to the protection of ownership rights and the functioning of justice, the yet unfriendly investment climate, the insufficiency of experienced specialists, the excessive role of the state in economy, the small market and weak competition. These ‘internal brakes’ are amplified by such external factors as the crisis in Ukraine, the economic difficulties in the EU and Russia, the bans imposed by Russia and the fall in remittances.
The report contains internal and external policy recommendations on several essential dimensions. According to the experts, a switchover from quantity to quality in education is needed in the area of labor force and the reforms initiated by the Ministry of Economy must be thus continued. A similar transition is required in the health sector. Adrian Lupusor underlined that the optimization and layoffs in education and healthcare are an essential precondition for ensuring the resources needed for modernizing this sectors, which are too costly.
Another policy segment is the diversification of the export markets that implies the improvement of the quality infrastructure, adoption of European standards and financial stimulation of small and medium-sized companies, which encounter difficulties in switching over to such high standards. As to the attraction of capital, it is recommended improving the investment climate by facilitating the issuing of more permissive documents for businesses and ensuring the real protection of the ownership rights. Another objective is to strengthen the national security by ensuring transparency and monitoring the financing of parties and by more efficiently supervising the financial-banking system.
The State of the Nation Report anticipates an economic growth of 3-4% a year for the next few years, which is only half of the rate of 7-10% needed for the living standards to reach half of the standards in the Western European states in 2040. Therefore, it is recommended that the pro-European political parties should change the rhetoric concerning the European integration. The effects of the Association Agreement will be diminished both by the ‘internal brakes’ and by external factors and it is important not to create too high expectations as the number of Euro-skeptics will increase if they are not met.
The study “Republic of Moldova 2014: State of the Nation Report” was prepared by experts Adrian Lupusor, Alexandru Fala, Denis Cenusa and Iurie Morcotylo and was presented within the second annual international conference “MACRO 2014: Making European integration work for people”. The event was organized by the Independent Analytical Center “Expert-Grup” with the support of the Friedrich Ebert Foundation.
