Moldova’s economy in 2018 grew at a rate that ranged between 4.2% and 4.6%, which covered practically all the essential sectors. The rise in foreign trade deficit was one of the most worrisome developments. The decisive structural and geographical tendencies strengthened through the growth of the European Union’s role. The data were presented by the Independent Think Tank “Expert-Grup” in the launch of the biannual publication “MEGA”. As regards the forecasts for next year, the analysts anticipate a GDP growth of 3.5%, according to the pessimistic scenario, and of 5.2%, according to the optimistic scenario, which is much below the optimal growth level of 7-8%, IPN reports.
As to public finances, the executive director of “Expert-Grup” Adrian Lupușor said the deficit this year will match the acceptable limits as share of the GDP, but next year the risks are evident given the electoral costs and the measures taken as part of the fiscal reform that, on the one hand, cut the fiscal revenues, and, on the other hand, increase costs. The risks also derive from the method of financing the budgetary deficit. The access to external financing sources is limited, especially for 2019, and the financing based on the state-owned real estate purchased by commercial banks runs counter to the Government’s objective to stimulate investment activity by lending. The banks prefer to lend to the Government at acceptable interest rates and to risk almost nothing than to lend to the real sector.
As to the fiscal reform, Adrian Lupușor said this is designed to diminish the informal employment, but it is evident that this is not a sufficient measure. “The government should not limit itself only to fiscal measures and employees’ awareness of the risks posed by this phenomenon should be increased. The employees should be also informed to better negotiate the contracts with employers,” he stated.
The director of “Expert-Grup” also spoke about the robust growth in the number of loans released by the micro-finance sector, saying this is a positive phenomenon, but is also a negative one in the context of a rather permissive sector regulation level. The recommendation to the authorities is to pay greater attention to the management of this sector.
Among the risks that could compromise the forecast for 2019 is the political climate that could have implications for the real economy and for the balance of the national public budget. Sergiu Cioclea’s resignation from the post of National Bank governor also adds a dose of uncertainty as to the extent to which the central bank will remain a supporter of the strategy for directly targeting inflation and ensuring and maintaining the stability of prices in the medium-term. Traditionally, the weather conditions are also a major source of risks. As policy recommendation, the experts reiterated the adoption of a precautious and moderate fiscal policy for 2019, which would ensure the stability of the fiscal and budgetary systems in the medium and long terms.
