Are lower imports a first effect of the world crisis? Economic analysis by Info-Prim Neo

Imports into Moldova in September fell by 3.6% from August. This is for the second time this year that the flow of goods that enter the home market decreases. In May this year, imports dropped by 11.8%. During the previous years, the imports also decreased over April-May and that could be named a trend. But this is for the first time in the past three years that the imports decrease at the start of autumn, when the people make purchases for winter and imports should rise. Is this a first effect of the crisis that resulted in lower consumption or a pure coincidence? We will find the answer to this question the coming months. A relative reduction in imports in September at a time when exports remained at the same level as in August – 154.5 million US dollars – “has led to a 5.5% decrease in the balance-of-trade deficit,” the National Bureau of Statistics said. But the different development of imports and exports has not radically modified the development of foreign trade over January-September 2008”. The deficit was close to 2.5 billion US dollars, almost double figure compared with 2006. Imports were over 2.5 times larger than exports. Is a further decrease possible in the coming months? What can cause a possible decline? The rising consumption fueled by the larger remittances sent by the individuals working abroad stimulated imports. The economy became dependent on remittances, fact ascertained by foreign financial experts as well. But, as the Resident Representative of the International Monetary Fund in Chisinau Johan Mathisen said recently, the volume of remittances could decrease as a result of the world financial crisis. A part of the migrants would return home, though it is said that many of these would prefer to be unemployed abroad that return home. But even those that would remain in Italy, Portugal, Russia or Spain would earn less and would correspondingly send home less money. Even the significant rise in the volume of consumption loans (by over 40% a month) taken out by the population from banks would not compensate for a possible decrease in the remittances from abroad. In September, the population borrowed 285.67 million lei from banks, as against 201.18 million lei in June. This is only a fourth of the sum transferred monthly by the Moldovans working abroad. It would be a chain reaction. Remittances will decrease and consumption will also decrease. Imports will fall as well. Consequently, the economy will be affected. It is for the time being a hypothetic situation that is yet taken into account by foreign experts inclusively. Sales on certain segments of the market have already decreased, including in the large chains of shops that face liquidity problems. Some of the importers demand that the chains pay in advance for the goods they supply. Businessmen fear the situation could get worse in three-four months. The turmoil on the financial markets could have a delayed effect in Moldova. The real sector of the economy and trade, including foreign one, would be the first to be affected, to a certain extent. The crisis that hit car making could lead to a reduction in imports of motor vehicles that take the fourth position in Moldova among the most imported groups of goods. The textiles industry will be also affected if the foreign partners reduce the number of orders in Moldova. The signals coming from outside, including from the market segments that connect Moldova with the key commercial partners, are worrisome.