ECO-BUS WEEKLY DIGEST–November 18-24. Most important Economy & Business news by IPN
● TUESDAY, November 19
Igor Dodon announced increases in pensions and salaries to strengthen his position before presidential elections, opinion
The announcement regarding the increase in pensions and salaries, the granting of some social aid for the disadvantaged layers of society was made by the president Igor Dodon so that he can consolidate his position before the presidential elections to be held next year. That is the opinion of commentator Corneliu Ciurea, who believes that there is nothing out of the ordinary when a politician resorts to such actions to boost his image. "And one of the explanations of this stepping into the limelight of Mr. Dodon, and not of Mr. Chicu, was precisely his need to receive a round of applause and to be the center of attention. The next ballot has influenced this action, but I do not know to what extent politicians can be blamed for wanting to stand out, "Corneliu Ciurea told TVR Moldova.
"This government is guided by a devil-may-care attitude," former Minister of Finance
Former Minister of Finance Natalia Gavrilița claims that five of the seven actions announced at a joint conference by the President, Prime Minister and Parliament Speaker have been planned by the previous government. However, due to the other two populist initiatives, the current government risks not having enough financial means to pay for all of them. Natalia Gavrilița refers to the double indexation and the 700 lei for pensioners. "It is important to mention that in fact, most of the announced social programs are from the solidarity budget proposed by the Sandu Government, both the 10% wage rise and the increase in the social aid for the cold season from 350 to 500 lei, the increase in the allowance for veterans from 100 to 300 lei. And we regret that other social programs that we proposed, such as “help with the energy meter” - supporting low-income pensioners to pay for electricity, have not been included. However, it is not clear how these expenses will be covered, because in the solidarity budget I have proposed a sustainable, realistic way of financing these programs”, said Natalia Gavrilița in an interview with Radio Free Europe.
Public finances and budget situation is complicated, prime minister
Prime Minister Ion Chicu said that the situation regarding public finances and the budget is quite complicated, "as complicated as it was a month, two months or earlier this year". Even so, there is a firm belief that the revenue share of the state budget and the national public budget will be filled and all expenses will be covered. On November 14, there were slightly more than four billion lei on the accounts of the national public budget, Ion Chicu said. "Indeed, in this period, significant amounts have entered the accounts from credits or grants offered by external partners, including the European Union and the International Monetary Fund. These amounts were initially planned in the Budget Law for 2019, which was drafted in the fall of 2018. In fact, we are dealing with the operation of the budget as it was planned. The are no extra incomes", the prime minister said after the executive's meeting.
Government proposes that export permits be stored at Customs Service
The head of the cabinet, Ion Chicu, says that the situation regarding the transport branch is serious, and as a result the export of agricultural-food products and other items is blocked. According to the prime minister, besides the lack of transport permits, the problem is complicated because the element of corruption persists in their distribution. In this regard, the Government proposes that these authorizations be stored at the Customs Service and issued at the exit of the truck from the country. The prime minister has said, after the Government meeting, that the Russian Federation has issued a number of authorizations, perhaps insufficient, but quite large. ANTA, the institution in charge from the Republic of Moldova, has distributed them in such a way that some companies failed to use them, while others did not receive them. "This is one of the objections of the Russian Federation - we gave you enough, but not all were used," said Ion Chicu.
● WEDNESDAY, November 20
Free postal services for blind people and prisoners of war
Postal services will be provided for free to people with visual impairments and prisoners of war. For 2020 the Government has set aside 45,600 lei in the state budget for this purpose. A draft law to amend the Law on postal communications was passed by the Government on Tuesday, November 19, IPN reports. The draft also provides prohibition of dispatches containing narcotics and psychotropic substances, obscene or immoral objects, explosive, flammable or radioactive materials and dangerous goods to be sent, received or returned.
Travel agencies report increasing demand for winter vacations
Winter holidays are increasingly popular among Moldovans, while the mountain range is the most desired destination. Asked by IPN, the Pandatur Travel Agency manager, Mariana Grajdeanu, said that many Moldovans have already planned their winter holidays in order to benefit from early bird discounts and accommodations at favorite hotels. The number of requests for Bulgaria's offers have increased by 30%, compared to five years ago. The number of requests for Ukraine and Romania increased by 20%, these destinations remaining the most popular vacation spots.
Reverse taxation for property of enterprises in insolvency proceedings
From January 1, 2020, it is proposed to apply the principle of reverse taxation for property of enterprises in insolvency proceedings. In addition, from January 1, 2021, this principle is to be applied for the pledged property, the mortgaged property, the seized property. These provisions are contained in the draft law on the tax and customs policy for the year 2020, brought forward by the Ministry of Finance for public consultations. The draft law mentions that, according to the tax legislation, the calculation, reporting and payment of the VAT amount is made until the 25th of the month following the one in which the transaction was conducted.
Average rate on new loans granted in lei was 8.63% in October
In October this year, the new granted loans amounted to 3 336.2 million lei, an increase of 17.9% compared to October 2018. The share of loans granted in national currency represented 56%, while loans in foreign currency constituted 44%. The average rate on new loans granted in national currency was 8.63%, while for loans in foreign currency it was 4.46%. According to National Bank of Moldova data, the volume of credits granted in national currency constituted 1 867.7 million lei. The volume of loans granted in foreign currency, recalculated in Moldovan lei, constituted 1 468.4 million lei.
A new distribution of taxes is proposed for local budgets
Revenues in local budgets could increase by over 1.9 billion lei through a new distribution of taxes paid by natural persons and legal entities, after the Parliament will amend the Law on local public finances. The public administration commission, which is meeting today, approved the draft law. The bill provides for the establishment of two quotas of the breakdown of the income tax of the natural persons, collected on the territory of the respective administrative-territorial unit. The first quota, for the budgets of villages and communes, as well as of the towns and municipalities, apart from the district-residence municipalities, is proposed to be set at 100%. The second quota, for the budgets of the district-residence municipalities and the Chisinau and Balti municipalities, will constitute 50%.
● THURSDAY, November 21
Russia will grant one thousand authorizations for Moldovan exports, prime minister
In the coming days, the Russian Federation will grant a sufficient number of authorizations, initially one thousand, in order to unlock the exports of good from Moldova to the Russian market, by auto transport. The news was announced by Prime Minister Ion Chicu in a press conference, held on Wednesday evening, November 20, upon his return from the Russian Federation. According to the head of the executive, the problem of international exporters, who could not operate on the Russian market due to the lack of transport permits, was solved. Russian partners called for the implementation of a transparent mechanism and the elimination of corruption in the permit distribution process. In this regard, the head of the cabinet of ministers talked about the proposal to issue these authorizations directly to the carriers at the customs.
Ion Chicu: Significant gas price decrease was agreed upon
Prime Minister Ion Chicu said that an agreement was reached in Moscow regarding a significant decrease in gas prices delivered to the Republic of Moldova from January 1, 2020. "Since October 1, gas tariff have been reduced by about $15, while after January 1, the tariff will be reduced by another 50 dollars and will amount to about 172-173 dollars per cubic meter", said the prime minister in a press conference, held on Wednesday evening, November 20, upon returning from his visit to Moscow. The head of the executive said that the risks involved in the supply of natural gas will be discussed next year, because, at the current stage, a contract for the transit of natural gas on the territory of Ukraine has not been signed yet. Should negotiations between the Russian supplier and the Ukrainian carrier fail, alternative gas supply scenarios will need to be activated.
6-12 month term deposits were October's most attractive deposits
The most attractive deposits in October were deposits with terms from six to twelve months, equaling 43% of total deposits, IPN reports referring to National Bank of Moldova data. In October, the volume of deposits in the national currency constituted 1 633.6 million lei, which represented a 7.9% increase compared to the previous month and a 2.1% increase compared to October 2018. The volume of deposits in foreign currency, recalculated in Moldovan lei, constituted 923.3 million lei, which was a 5.4% decrease compared to the previous month and a 19.7% decrease compared to October 2018.
Implementation of Third Energy Package conditioned on the settlement of gas debts
The implementation of the Third Energy Package and the Law on natural gas, brought in line with the European directive, is conditioned by the European energy community on settling the debts for natural gas and regulating the ownership of assets, that is, the overall assets and property of "Moldovagaz" SA. The subject of regulating the payment of historical gas debts has been discussed in Moscow by Prime Minister Ion Chicu and the management of "Moldovagaz" with the administration of "Gazprom" public JSC. During the discussions, it has been mentioned that the gas debt of the right bank of the Dniester constitutes 443 million dollars, while that of the left bank is of 6.2 billion dollars.
New provisions regarding deductions for payments made to employees
The draft fiscal and customs policy for the coming year provides for the inclusion of a rule expressly ensuring the right of the economic agent to benefit from deductions for payments made to or for the benefit of the employees, from which salary taxes have been withheld. The Ministry of Finance said that the introduction of this norm will positively impact the expenses related to food and organized transport. The bill, which was submitted to public consultations, addresses the frequent practice of employee stimulation, by the employer, through different benefits, such as national holiday allowances, birthday payments, gym subscriptions, etc., for which the economic agent withholds all salary taxes.
Decrease in gas prices is natural in current market situation, expert
Energy expert Sergiu Tofilat believes that the decrease in the import prices of natural gas, announced by the authorities upon the return from the Russian Federation, is natural in the current market environment. In his opinion, all that the Moldovan authorities have done is that they discussed the extension of the contract with "Gazprom" to ensure the reliable supply of natural gas. "President Igor Dodon was keen on speculating about the issue of lowering gas prices. We need to understand how this happens and how the price is formed for the Republic of Moldova. It is set quarterly, meaning that every three months it changes, depending on the gas price on the EU market a year ago. Respectively, if in the European Union the gas price has dropped significantly this year, for us, the decrease will start after the New Year. Now this decrease is not due to Mr. Dodon's relation with the Russian Federation either, but to the market situation,” Sergiu Tofilat
● FRIDAY, November 22
Additional gradual excise tax on luxury car import
Starting next year, the additional gradual excise system for luxury cars will be applied. When importing cars with a value of more than 600 thousand lei, a 2% excise duty rate will be applied. The tax will gradually increase, depending on the price of the car, up to 10% for cars costing 1.8 million lei and more. The provision is part of the draft budgetary-fiscal policy for 2020, submitted to public consultations. The tax legislation in force provides for an additional excise tax of 2% for cars worth more than 1.5 million lei. In 2018, by taxing the import of 79 cars worth more than 1.5 million lei, about two million lei were collected to the state budget.
Revenues from sales and services have increased
In the first nine months of the year, retail trade revenues, except motor vehicle and motorcycle sales, increased by 14.1% compared to the same period of last year. According to National Bureau of Statistics data, motor vehicle and motorcycle turnover registered an increase of 25% in the first nine months of the year. During the same period, revenues from services provided mainly to companies increased by 12% compared to the same period of 2018.
Ion Chicu in London: We want to promote our vision of high-performance agriculture
The automotive sector has proven to be a success story in the Republic of Moldova. The volume of exports and the number of jobs created doubles every year, reaching 15 thousand employees in 2018. The statement was made by Prime Minister Ion Chicu at the EBRD Investment Forum, dedicated to the Eastern Partnership states. The event was organized in London by the European Bank for Reconstruction and Development, on the occasion of the 10th anniversary of the EaP initiative. The event brought together heads of states and governments from Azerbaijan, Armenia, Georgia, Ukraine, Belarus and Moldova, high-level representatives of the EU and the EIB, as well as international investors.
Over 4700 consumers remained without natural gas due to debts
The supply of natural gas to over 4700 final consumers was stopped due to the non-payment of debts of over 17.7 million lei. The data were presented at a meeting for monitoring the activity of the companies affiliated to "Moldovagaz" company during January-September 2019. Most debtors are domestic consumers - over four thousand people, who have accumulated debts of over 7.4 million lei. While over 550 non-domestic consumers have accumulated debts of over 10.3 million lei. Between January and September 2019, natural gas supply contracts were concluded with over 33 thousand domestic consumers.
Ion Chicu met with his Azerbaijan counterpart
The social and economic relations between the Republic of Moldova and Azerbaijan have a much greater potential than the explored one. The existing volume of mutual trade does not fully reflect the capacity for cooperation between these states. During a meeting held in the margins of the EaP Investment Summit, organized by the EBRD in London, Moldovan Prime Minister Ion Chicu told his Azerbaijan counterpart, Ali Asadov, that it was necessary to develop some ideas to improve future bilateral trade and economic relations. In a Government press release, quoted by IPN, it is said that the two officials discussed the development of economic relations, the organization of business forums, but also the prospects of intensifying cooperation in the energy sector. Further, Ion Chicu reiterated the interest of the Republic of Moldova in promoting the political dialogue between the two states at different levels.
● SATURDAY, November 23
Ion Chicu's visit to Moscow is the first one in the last seven years and is positively regarded, opinions
Political commentator Corneliu Ciurea argues that announcements made during Ion Chicu's visit to Moscow demonstrate Russia's openness to the current Government. However, the commentator specifies that if Prime Minister Maia Sandu had made a visit to Moscow, then she would have been met with more pomp, for she was expected there. Corneliu Ciurea says the Chicu Government, which was supported by the Socialists, managed to get the green light from the Russian Federation at once. Furthermore, the commentator maintains that Russia does not always do certain things without a vested interest.
The government's focus social projects could have long-term negative impact, economists
The government's focus on social projects, recently announced by President Igor Dodon, could have a long-term negative impact. While increases in salaries, pensions and allowances will increase government spending, no investments in the economy that would boost revenues were announced. This opinion was expressed by economists Viorel Gârbu and Sergiu Gaibu. According to them, ignoring the investment sector could have a negative impact over the years. Economist Viorel Gârbu said that the budget has the necessary funds in order to cover these social initiatives because the announced increases by the government are not extraordinary. According to him, the question is what are Moldova's priorities and whether the decisions to spend financial resources made by political elites will sacrifice the future of the country?
Calculation of depreciation of fixed assets for tax purposes, discussed with the business environment
The draft Regulation on the accounting and calculation of the depreciation of fixed assets for tax purposes provides for simplifications and clarifications regarding several aspects. The draft aims to provide a comprehensive regulatory framework, witch minimizes costs incurred by the business environment to ensure the record of fixed assets for tax purposes. The draft was discussed at a meeting organized by the Ministry of Finance with the participation of the business environment. The Minister of Finance, Serghei Pușcuța, said that the Regulation on the accounting and calculation of the depreciation of fixed assets for tax purposes is a very important bill that directly relates to the activity of the accounting and financial services of economic entities: “It is a draft long awaited by the business environment. A lost of effort has been invested in order to produce this bill. The purpose of this draft is to provide an efficient, transparent and clear framework for the business environment", said Serghei Pușcuța, quoted in a Ministry of Finance press release.
