The economic situation in the Transnistrian region has worsened faster than on the right side of the Nistru River. The convergence indicator that determines the degree of rapprochement between the two economies fell to 95.1% in the first quarter of this year, 1.9 percentage points down compared with the third quarter of last year (100% represents full convergence). A structural distance between the economies from both sides of the Nistru River is thus ascertained. The conclusions are contained in the last edition of the Transnistrian Economic Realties issued by the independent think tank “Expert-Grup” with the assistance of the Support to Confidence Building Measures Program that is financed by the EU and implemented by UNDP, IPN reports.
According to a press release of “Expert-Grup”, the main causes for the structural distance between the two economies reside in the problems faced by the firms and population of the Transnistrian region, whose situation worsens at a greater pace than on the right bank of the Nistru. In particular, the greater economic uncertainty in the region led to a reduction in investment activity, including a decline of about 15% in capital creation. On the left side of the Nistru, the decrease in this figure was three times lower. As to external trade, regression was witnessed in both of the cases, but Transnistria’s imports diminished more owing to the dramatic reduction in the population’s incomes.
Though both of the economies face serious problems, the economy from the left side of the Nistru does not have mechanism for remedying the situation in case of economic shocks. On the right bank of the Nistru, the economic shock was offset by the floating exchange rate of the Moldovan leu (a depreciation of 25% in 2015), while in Transnistria the economic situation was worsened by the administrative fixing of the exchange rate of the Transnistrian ruble against the dollar and by the dependence of particular industrial sectors that affect the diversification of external trade. As a result, Transnistria’s economy in 2015 contracted by 20.2%, while the economy on the right side of the Nistru – by 0.5%.
One of the most important decisions that the authorities of the region are to adopt in 2016 concerns the depreciation of the Transnistrian ruble and the augmentation of bans on the purchase or export of foreign currency. As the foreign exchange reserves in the region (about US$11-12 million) are not enough for covering one week of imports at least, while the demand for foreign currency exceeds the supply several times, maintaining the exchange rate of the Transnistrian ruble fixed against the US dollar becomes impossible. This leads to the appearance of the black currency market, with exporters suffering major losses.
As to the solutions for remedying the situation, Adrian Lupusor, executive director of “Expert-Grup”, said the administrative measures will not solve the main problem – low competitiveness that is continuously decreasing. Consequently, the solution is to gradually devalue the ruble in parallel with the improvement of the business climate, augmentation of investments in infrastructure and implementation of the main economic provisions of the Moldova – EU Association Agreement.
