ECO-BUS WEEKLY DIGEST April 6-12. Most important Economy & Business news by IPN
● MONDAY, April 6
NBM recommends banks to refrain from paying dividends
The National Bank of Moldova (NBM) recommends the licensed banks to refrain from distributing dividends to shareholders and other forms of capital distribution, at least until September 30, 2020. The decision was taken by the NBM’s Executive Board in a move to mitigate the effects of the COVID-19 pandemic so as to keep banks well-capitalized and stable. The Board also approved measures to relax the requirements for capital buffers. Thus, the NBM allows banks to use temporarily (until a later date is communicated) the previously set capital conservation buffer. The preserved capital can be used to absorb eventual worsening of the loan portfolio quality and to support the financing of the business community and the population.
Chisinau Electric Transport Company reports losses of 18m lei since March 17
Since the state of emergency was declared because of the COVID-19 pandemic until end-March, the Chisinau Electric Transport Company reported failed revenues of about 7.5 million lei and costs of 18.3 million lei, acting head of the Public Transport and Communications Division Lilian Copaci stated in the ordinary meeting of officials of municipal services and divisions. For the same period, the Urban Bus Company reported failed revenues of 1.6 million lei and costs of 6.8 million lei. The Public Transport and Communications Division is preparing a letter to mayor Ion Ceban with all the calculations, including the extra costs incurred for protection devices and disinfectants.
Alcohol used to make disinfectants will not be exempted from excise duties
The alcohol used to manufacture disinfectants will no longer be exempted from excise duties, Prime Minister Ion Chicu was quoted by IPN as saying after the meeting of the Commission for Exceptional Situations. Premier Chicu said the problem was solved and there are enough quantities of disinfectants on the market. “We have received requests to exempt quantities larger than 300 tonnes from excise duties. This is an extremity and exaggeration. Surely the state cannot fall into such traps and we annulled this exemption as of today,” he stated.
● TUESDAY, April 7
Mihai Popușoi: Employees are laid off and will not be able to return to work
The Government of the Republic of Moldova should accept the opposition’s proposal that the state should pay salaries equal to 75% of the average official salary. MP of the group of the Action and Solidarity Party (PAS) Mihai Popșoi said that after many of the enterprises stopped work, the employees are laid off and many of them will be unable to return to work. “The encouragement of unemployment by increasing the unemployment benefit only forces the business entities to make the employees redundant. We suggested keeping the jobs and offering state subsidies for salaries in the amount of 75%, but not more than 75% of the average official salary so that we keep all the jobs. Or many of the citizens who will be made redundant will be unable to return to work because the enterprises will be affected and could not reemploy them,” Mihai Popuoi stated in the program “Emphasis on Today” on TVR Moldova channel.
Pavel Filip about expected crisis: We must stimulate domestic production
The leader of the Democratic Party of Moldova, Pavel Filip, ex-Prime Minister, said the authorities should stop all the investment projects and all the financial resources should be aimed at ensuring incomes for people and at supporting the business community, small and medium-sized enterprises. According to Pavel Filip, the country’s administration should think about subsequent measures as the unemployment rate will rise and the financial flows and remittances will decline and the pace of growth all over the world will considerably slow down.
Spread of coronavirus induces additional disinflation pressure
At the current stage, the spread of the coronavirus induces additional disinflation pressure on consumer prices. This way, the information about the annual rate of inflation in January and February and the events that took shape after the previous round of forecasts reveal the risk of a trajectory inferior to that published in the Inflation Report No. 1, the National Bank has said when answering a number of questions concerning the situation in the national banking sector during the state of emergency declared in Moldova. According to the Bank, the major risks for the start of 2020 and for the forecast horizon until the start of next year are related to disinflation determined primarily by the atypical weather conditions, the elimination of provisions that existed earlier in the fiscal policy, the lower GDP deviation for this year following the impact on the national economy of the measures taken by the authorities to contain the COVID-19 pandemic and a more disinflationist external environment.
NBM publishes report on legality of granting emergency loans for three banks in 2014-2015
The granting of emergency loans to “Banca de Economii”, “Banca Sociala” and “Unibank” during November 2014 - April 2015 took place in compliance with the legal framework, with the competence of the National Bank as the central bank, in accordance with the objectives existing at that time and in cooperation with the competent state authorities, says the report on the legality of granting the emergency loans totaling 9.434,5 billion lei, with state guarantees, which was presented by the National Bank of Moldova (NBM). The report notes the move was designed to ensure the orderly resolution of these banks in order to avoid serious disturbance of the critical functions of the banking sector (access to bank deposits, payments making, ensuring of the channel of transmission of the monetary policy), the priority protection of depositors and maintaining the financial stability.
● WEDNESDAY, April 8
Period of validity of electronic signatures extended to two years
The period of validity of the electronic signatures issued by the Center for Information Technology in Finance was extended to two years, IPN reports, quoting a press release of the Center. “As from April 8, the interested persons can ask to be issued with an electronic signature for a year or two, depending on necessities,” said the Center’s director Vitalie Coceban. He noted the opportunity of obtaining an electronic signature for two years is more advantageous for applicants in terms of costs and of the necessity of renewing it.
Crisis can be moment for rethinking economic development model, “Expert-Grup”
The crisis situation can be a moment for rethinking the model for developing the national economy. Some of the sectors could obtain an additional dose of competitiveness, while the necessity of others will be in question. To ensure the recovery of the economy, internal consumption should be secured with more goods and national services. The online goods distribution channels and cashless payments should be stimulated, while the underground economy should be reduced, suggested experts of the Independent Think Tank “Expert-Grup”, who presented a set of measures in a videoconference that involved representatives of the state, trade unions and employers.
If small businesses are not actively supported, number of jobless persons can treble, opinion
If the small businesses, national producers are not actively supported to avoid their bankruptcy and massive layoffs, the situation regarding labor force and unemployment can change drastically. The number of people out of work can double or even treble given that many of the Moldovans who left the country return home. But an opportunity can exist here as the number of vacancies last year was higher than the number of officially registered jobless persons, Sergiu Sainciuc, vice president of the National Confederation of Trade Unions of Moldova, stated in a videoconference organized by the Independent Think Tank “Expert-Grup”.
PPPDA seeks transparency in government procurement
The parliamentary group of the Party “Dignity and Truth Platform” (PPPDA) demands to ensure transparency in government procurement. It asked the Government and the Commission for Exceptional Situations to provide information about the government procurement procedures held to purchase protective equipment. The group’s leader Alexandru Slusari said questions were put after having discussions with the Light Industry Employers Association and after examining a number of letters from enterprises operating in the textiles industry. The PPPDA MPs ask why there are no certification standards with technical specifications for each type of consumables in medicine, why the price of equipment is the most important criteria when choosing the winner in government procurement as there are more cases when the imported masks and gloves, being of a poor quality, become worn-out swiftly, and others
● THURSDAY, April 9
World Bank: Moldova’s economy will contract in 2020, assuming a gradual recovery
Moldova’s economy will experience a contraction in 2020, assuming a gradual recovery from the third quarter of the year onwards. In addition to the temporary shut-down of key economic activities and the related income loss, the impact of the outbreak in Moldova will primarily be associated with decreasing demand for exports due to a disruption of global and regional supply chains and a reduction of travel and tourist arrivals, as well as remittances, IPN reports, quoting a press release of the World Bank. According to World Bank’s Spring 2020 Economic Update for Europe and Central Asia, if the outbreak persists beyond the second quarter of 2020, the impact of COVID-19 will have more severe effects resulting in a deeper recession and long-lasting losses in jobs and production. The economy is expected to recover in 2021 as the global economy rebounds in the aftermath of the pandemic.
Solutions for those who planned trips before March 17
The COVID-19 pandemic and, as a result, the declaring of the state of emergency in the Republic of Moldova made a number of Moldovans to renounce the planned trips and vacations. The tour operators found themselves in the situation where they have to return the money to clients. But the collected money was already transferred to service providers abroad. In such conditions, the tour operators ask the consumers to be understanding and to reschedule the vacation. Contacted by IPN, Anna Colța, president of the National Association of Truism Legal Agents of Moldova, said the sales of tourist products for the May-October 2020 warm period directly or through intermediaries started last October and this process lasted until March 17. In parallel, the organizers in the period signed cooperation contracts with tourist service providers, such as foreign tour operators, airlines, accommodation facilities, carriers, etc. Advances, deposits were paid as a result.
Sales of apartments are by 60% higher, economist
The sales on the real estate market in the first three months of this year were by 60% higher than in the corresponding periods the previous years. Economist of the Institute for Development and Social Initiative “Viitorul” Veaceslav Ioniță said the real estate market for the first time exceeded 30,000 apartments a year, in the first quarter of this year registering 31,029 apartments sold or bought during the past 12 months. This volume of transactions is twice higher than the annual traditional sales in Moldova in the last ten years, IPN reports, quoting a press statement of the economist. The number of apartments sold by mortgage decreased, the number of bought apartments reaching 9,500 in annual value, as opposed to 9,700 in 2019. “The people continue to more actively buy apartments, but with a lower interest in home loans,” stated Veaceslav Ioniță. According to the economist, even if the banks offer more opportunities of financing to the people, the real estate market grows much faster and the banks lag behind. “Even so, the portfolio of bank loans released in the building sector reached a maximum of 18%, which is an absolute historical record,” he noted.
Measures adopted by Government stimulate layoffs, debates
The measures taken by the Government during the state of emergency are insufficient. That subsidization by refunding taxes to businesses is a solution that looks well in terms of support for the business community, but the budgetary impact is overestimated. The stimulation of layoffs is one of the effects of the given measures that envision the payment of that unemployment benefit, said participants in a debate staged by the Institute for European Policies and Reforms. Economist Marcel Spătari, director of Syndex Romania, said the procedure for refunding the taxes from salaries is not yet clear for the State Tax Service and the accountants. On the one hand, the authorities speak about the institution of a moratorium on inspection. On the other hand, the business entities that will benefit from this subsidization will be subject to thematic control. Given that a part of the firms work on the gray market, they do not want and are afraid of inspections. Another aspect is the size of exemptions from which the business entities will benefit. If the costs associated with salaries are taken into account, the impact will not be of over 40% by far, as the authorities announced. The budget planned for paying unemployment benefit should have been used to pay benefit for technological unemployed, directly to salary earners, as they decided in Romania, for example.
● FRIDAY, April 10
Number of jobless people could double or even treble, opinions
Together with the declaring of the state of emergency and the adoption of a number of measures, the number of the unemployed will double or even treble. Besides the fact that many business entities stopped work, for the salary earners with small pays it is more convenient to get fired and to receive unemployment benefit, which will be higher. In such conditions, the authorities should think now already where these persons out of work can be employed, including the citizens who return home, ensuring their re-qualification, said participants in a debate staged by the Institute for European Policies and Reforms. Economist Marcel Spătari, director of Syndex Romania, said the salary earners ask to be sacked so that they could receive that unemployment benefit of 2,775 lei, which in practice is higher than that salary of 50% received in the case of technical unemployment. This is a strange situation as those who keep the job receive less money that the unemployed persons. This happens in the case of small salaries on paper on which the employer should also pay taxes. The jobless person gets 2,775 lei on which no taxes are paid.
Ion Sturza: Over 300,000 people will lose jobs owing to pandemic
Former Prime Minister Ion Sturza anticipates losses of billions of lei to the Gross Domestic Product and in budget revenues. He said the previous statements by which the authorities announced the forecast 3% reduction in the GDP and losses of 7 billion lei are misleading. “In the Republic of Moldova, the reduction in the Gross Domestic Product a will be of 20-25% a year. This is approximately 50 billion lei losses to the GDP. This means losses of 15-20 billion in budget revenues. These things are not dictated by the incompetence of the authorities, but by the virus. Such things happen in other states too and there is a mathematical correlation between what is going on in the pandemic area and what is going on in the economic sector and what measures should be taken by the governments so as to appropriately deal with these challenges,” Ion Sturza stated in the talk show “In Depth” on Pro TV channel.
Igor Dodon: Some of restrictions will be lifted at end of April – start of May
A decision on the extension of the state of emergency hasn’t been taken, President Igor Dodon stated in a new issue of the program “President Responds”. If the situation generated by the COVID-19 infection is difficult, Parliament will be proposed to extend the state of emergency. “Either Parliament takes such a decision or does not, we consider some of the restrictions on economic activity, trade, the hospitality industry should be lifted at the end of April or the start of May,” he was quoted by IPN as saying.
Government extends ban on export of masks, gloves and disinfectants
The ban on the export of medical face masks and gloves and biocidal products (disinfectants) was extended for a month, until May15, when the state of emergency is to be lifted. A decision to this effect was taken by the Cabinet on April 10. According to Deputy Prime Minister Sergiu Pușcuța, Minister of Finance, the decision was taken in a move to make sure Moldova’s internal needs are satisfied. “The decision was drafted following the spread of COVID-19 in the Republic of Moldova and the rise in the number of confirmed cases of infection,” he stated.
● SATURDAY, April 11
Eugeniu Nikiforchuk: I have never held license to extract minerals
Democratic MP Eugeniu Nikiforchuk denies the reports that a part of the legislative amendments adopted by the Government by bypassing Parliament are in his interest. He said he never ran businesses in the field of mineral extraction. “It’s a pity that some of the media outlets, in pursuit of news stories, broadcast unsupported news items. I have no interest in those changes as I never ran mineral extraction businesses. I have declared all my interests during many years,” Eugeniu Nikiforchuk stated in the talk show “Important” on TVC21 channel.
Chisinau City Hall presents possible scenarios in case pandemic expands
Mayor General of Chisinau Ion Ceban said the City Hall halted all the tender contests that were to be held in the nearest future. He noted the municipality designed a number of scenarios under which a series of projects to the value of hundreds of millions of lei will be definitively stopped. “We halted all the planned tender contests. Without the coordination of the Commission for Exceptional Situations, these will not be held. For the ongoing tender contests, we must find legal ways to see if we can sign contracts or not. If we see that the situation has worsened and the tender contest was held, but the contract wasn’t signed, the money will be redirected. If we overcome this situation swifter, the people will start to work so as not to lose another 45 days,” Ion Ceban stated in a Special Edition on NTV channel.
Official reserve assets down in March
The official reserve assets at the end of March were US2.948,71 billion, down US$76.69 million on February 28, when these totaled US$3.025,40 billion, IPN reports, with reference to the National Bank of Moldova. According to the Bank, the decline was due to interventions in the domestic currency market in the form of sales of foreign currency and payments for servicing Moldova’s external public debt. It was also influenced by the depreciation of the exchange rates of the foreign currencies that form part of the reserve assets against the US dollar, the payments made by the Ministry of Finance and other net inflows. The rise in the official reserve assets was determined by net inflows related to the required foreign currency reserves of licensed banks (US$13.55m) and the receipt of the loan from the IMF (US$13.29m under the Extended Fund Facility, sixth tranche, and US$ 6.57m under the Extended Credit Facility, sixth tranche.
