“Expert-Grup”: Ordinary citizen is not sure of the continuous GDP growth in Moldova

The ordinary citizen cannot be easily convinced of the continuous growth of the Gross Domestic Product (GDP) in the Republic of Moldova, which is intensely reported by the media. For the largest part of the Moldovans, the spectacular percentages presented in the official statistics do not mean a sufficient improvement in the personal welfare. Given that the GDP growth does not reflect well on the standards of living, such a growth does not equal development. Therefore, the growth of the GDP means nothing but an eventual quantitative change, an economic analysis by the Analytical Center “Expert-Grup” says. According to the economic analyst Alexandru Gamanjii, the data of the public opinion barometer conducted by the Chisinau Centre for Sociological Research and Market Surveys CBS AXA in May also proves this fact. In such a way, 59% of the population considers that the things in the economy go in the wrong direction, as against 52% in April 2006. As regards salaries (83.7% unsatisfied people), jobs (81.4%) and living standards (76.4%), the experts consider that these are the elements that are directly related to the GDP growth. They are still unsatisfactory because the period of January-May 2007 saw an industrial decline of 5.4% owing to the losses in the winemaking and winegrowing sector. Though the key component of the GDP remains the construction sector, there is witnessed a real housing boom due to the warm winter and considerable investment in this sector. As long as the prices of floor space grow, they beneficially influence the economy. The expert says that if the wines are not sold (partially or fully) – a situation typical of a large number of Moldovan companies following the Russian embargo – the economic growth based only on the numbering of wine bottles will remain unsound. [Unsound economic growth] According to the cited source, the industrial production in the European countries accounts for a significant share of the GDP in general. The results in different industries depend on the production capacities and the degree of using them, on the access to modern technologies, organisation of activity and quality of management. Regretfully, the inefficient allocation of resources in Moldova not only slows down the growth in the industrial sector, but creates a vicious circle by reducing the potential of absorbing labour force. Consequently, the growth possibilities of the middle income groups are reduced and the incomes continue to be unequal, a fact that primarily stimulates the development of an inefficient industrial sector. On the other hand, the industry in Moldova is closely connected with agriculture, and the industry processing agricultural raw material has the largest share in industry. Despite the increased priority, it can be said that the authorities pay little attention to the exact relationship between agriculture and the industrial development. At the same time, the agrifood sector is still perceptibly unstructured. The changes that occurred in the agrifood sector of Moldova after 1992 show that the sector encounters difficulties in adapting to the competitive market because the management does not aim at the formation of modern structures. As regards the contribution of foreign investments to the GDP growth, “Expert-Grup” considers that their specific features in Moldova did not constitute a factor for modernising and enhancing the competitiveness of the economy. On the contrary, they consolidated the inferior position, which Moldova occupies in the world economy, of a country with cheap and poorly qualified labour force, with a low value added production. The largest part of the foreign investments did not contribute to the achievement of the compatibility and competitiveness standards imposed on the common European market. They also had a determinant role in degrading the qualitative and structural relation between export and import, which led to the depreciation of the current account balance. Another stimulus for the GDP growth is the rise in internal demand and consumption. Moldova is a country that consumes much more than it produces. Both IMF and WB said the previous years that the GDP growth is inertial, determined especially by remittances and internal consumption. Given that the production is low, this money does not have coverage inside and they go back outside, from where they return in the form of massive imports, causing an increase in the trade deficit balance. Although our neighbours understood that it is essential to attract foreign direct investment and adapt the fiscal legislation, judiciary, and public administration to investors’ requirements, Moldova continues to be bypassed by massive investments. As a result, the GDP per capita is one of the lowest in the region – 936 USD (six times lower than in Romania and 2.4-fold lower than in Ukraine). Therefore, as long as the signals of the European institutions about corruption remain alarming, it is difficult to believe that Moldova will become the foreign investors’ favourite target. The National Bureau of Statistics announced recently that the GDP in the first quarter of 2007 was about 9.69 billion lei in comparable prices. This is by 7.3% more compared with the corresponding period last year. The growth looks unexpected as the authorities forecast a GDP growth of 5% for this year. The services in the construction sector, industry and trade account for the principal part of the GDP in terms of resources.