IPN News Agency presents a picture of the year in different areas in the view of governmental authorities and independent experts. “2018: how it was and how it wasn’t!?” No.6: Economy and Infrastructure
Economic development in figures
Secretary general of state at the Ministry of Economy and Infrastructure Iulia Costin said 2018 is prosperous from economic viewpoint. In the first half of this year, the GDP rose by 4.5% to 81.8 billion lei. A continuous improvement in the agricultural and industrial sectors was seen, determined by the enlargement of vegetal production, intensity of processing industry and rise in domestic and external consumption, etc. Foreign trade continues to reflect the upward trend highlighted in 2017, while the commercial exchanges attracted important investments. The activity in the building sector, mainly the erecting of new constructions, had a positive impact on economic growth.
Iulia Costin said among other results achieved in the economic sector are the reform of the inspection bodies, reduction in the number of permissive documents by 63%, launch of the electronic platform “One-Stop Shop” for using and managing permissive documents and simplifying the procedures for voluntarily liquidating the business. To diversify the financing of small and medium-sized enterprises, financial support programs and programs to ensure access to training were implemented in 2018. The business entities benefitted from non-reimbursable financing and financial guarantees that contributed to the creation of new enterprises and development of growing enterprises. As many as 413 enterprises received 68.52 million lei in non-reimbursable financing. Within the Free Economic Zones, there were created 2,055 new jobs and about US$ 391.4 million was attracted during the first ten months.
The industrial sector in nine months grew by 6%. The processing industry expanded by 5.8%, ensuring 78.3% of the growth in the sector. Investments rose by 13.5% compared with the same period last year, totaling about 12.9 billion lei. Exports in nine months increased by 18.7%, while imports by 21.6%. The exports of goods came to US$ 1.960,0 billion, up US$ 308.2 million compared with January-September 2017, while imports to US$ 4.181,5 million, up US$742.7 million on 2017. Exports to the EU rose by 27.9%. Among the main commercial partners are Romania, Italy, Germany, Poland, etc.
The area of information and communication technology is regarded as strategic for the country. Among the projects implemented in this area are the creation of the Emergency Telephone Service 112, the first IT park, the rethinking of technological and digital education in schools by introducing the subject “Digital education” starting with the first grade and optional robotic courses.
About 1,600 km of roads were repaired through the agency of the “Good Roads” Program. There was launched the project “Improvement of Local Roads” that is financed by the World Bank. This envisions the repair and rehabilitation of about 300 km of roads. Also in 2018, the feasibility study for rehabilitating the Bender-Basarabeasca-Giurgiulești railway line (245 km) was completed. The information system “e-Authorization for Transport” was launched and integrated into the governmental electronic payments service “M-Pay”.
Iulia Costin anticipates Moldova’s economy in 2019 will develop and the GDP growth will be of 4%. The industrial sector will continue its upward trend. A real growth of about 5% is forecast in this sector. The automotive industry will ensure 31% of the growth in the sector, the light industry (clothing) – 24%, while the food industry – 28%. Investments next year are projected to rise by about 3.3% following the restoration of financing for investment projects of the state. The investment projects with foreign financing are expected to total 2.8 billion lei. According to the National Bank of Moldova’s forecast, the loans released to the economy will grow by about 15% in 2019. Exports will rise by 13.1%.
Political climate remains a big unknowing with implications for the economy
Expert of the Independent Think Tank “Expert Grup” Alexandru Fala said the GDP growth in 2018 is forecast to be of 4.2% to 4.6%. The rise in the population’s revenues favored the consumption of households, which rose by 4.2% in the first half of the year as a result of the rapid growth in the revenues coming from social programs, including the almost 10% rise in pensions. The rise is welcome, necessary and natural in the political context that makes the Government amplify the “electoral alms”. However, in the long run, this increases the venerability of households.
The exports had a positive impact on the internal economic dynamics in 2018. The investment process intensified. After four years of decline (2014-2017), the private investments rose slightly. The gross fixed capital formation also grew, determined by public investment programs, such as the “Good Roads” Program. But this program was implemented without being planned and left the impression that the process rather than the result counts for the Government. A large part of the public investment program implemented in 2018 could turn out to be a waste of money that will not improve the economy’s predictive capacity and, in the medium term, will exert even greater pressure on public finances.
According to the optimistic scenario, the GDP in 2019 will grow by 5.2%, while the pessimistic scenario banks on a growth of 3.5%. The rise in revenues will fuel consumption costs of households: +5.6% according to the optimistic scenario and 4.3% according to the pessimistic scenario. Exports will grow by 8.7% according to the optimistic scenario and by 7.7% according to the pessimistic scenario. Owing to the reduction in the share of social contributions paid by the employers, the investment process could accelerate despite uncertainty about the growth.
The political climate in 2019 remains a big unknown with implications for the real economy and the balance of the national public budget. If the parliamentary elections are conducted inconclusively, this could lead to the worsening of the general sociopolitical situation and the firms would become more cautious in their investment plans. At the same time, the political stakes of the parliamentary and local elections could make the Government and the local authorities assume new budgetary obligations. This could further expand the budget deficit. The financing of this deficit in a more tumultuous sociopolitical and economic climate could be much more costly.
At the same time, it is now clearer that the EU will not resume the macro-financial assistance in the first half of 2019 and, for technical reasons, there are big risks that the assistance will not be resumed by the end of next year either. The accumulation of all the factors and risks could make the next Government adopt budget stabilization measures that could include the reduction in costs or rise in particular taxes.
Maria Procopciuc, IPN
Other materials of the campaign “2018: how it was and how it wasn’t!?”:
Agriculture, regional development and environment
Defense
Education
Justice
Transnistrian settlement
