Construction sector in Moldova is cut off from internal economic reality, expert

“The Moldovan construction sector, especially the homebuilding segment, has been mainly isolated from the internal economic reality owing to remittances. In order to have a sustainable growth in the construction sector on all the segments, we must develop our economic potential and learn to provide incomes for the population, businesses and everything that means consumer. In such a case, the money will work for the national economy,” Victor Parlicov, expert of the Institute for Development and Social Initiative (IDIS) “Viitorul”, has told Info-Prim Neo. In the first half of the year, the volume of construction works fell by about 40% compared with the corresponding period last year. In the homebuilding sector, they dropped by approximately 30%, while in the industrial-commercial sector – by 50%. The expert said that such a situation is due to the world economic crisis. The construction sector this year has been more seriously affected than last year. “Supermarkets have been opened, the chains of outlets selling domestic appliances have been extended, the commercial spaces have been enlarged, basing on the expectations that the people’s incomes will increase as in the previous years, and the investments will be recouped by increasing sales. But this has not yet happened owing to the crisis,” the expert said. “Consumption during six months fell by over 10%, while retail trade, especially in nonfood products – by 12%. As a result, the businesses have been also affected. They stopped practically all the extension construction works and made everything possible to conserve the unfinished buildings or, in a better case, to sell them. No new large-scale investment projects are now being initiated,” Victor Parlicov said. The expert said that the situation in the homebuilding sector is similar to that in the industrial constructions sector. “The house prices before the crises were exaggeratedly high. The homebuilding sector in Chisinau, which covers 65% of the total volume of residential constructions in the country, was 70% based on those working abroad, who purchased apartments for the children or to lease them out. But when the crisis started, their incomes as well as the house prices in Europe decreased and the prices of apartments in Chisinau reached the level of prices in Berlin or the suburbs of Milano. Evidently, the money left this market and the house prices in our country also went down,” Parlicov said. The expert said that a solution would be to develop Moldova’s economic potential so as to generate incomes for a large section of the population, the business, and ensure a stable internal demand. He also said that time is needed for an economic recovery as the economy erected during many years has a flawed structure. Many of the market instruments and institutions were destroyed and there is no fair competition. Furthermore, the economic entities are ’terrorized’ by the supervisory bodies. But the problems cannot be solved at once. The National Bank’s support also counts. Recently, it liberalized the monetary policy and let about 1.5 billion lei to enter the economy. But this money will not have a quick effect because the affected economic entities, especially those working in the construction sector, need time to recover. “A recovery is likely in about two years,” Victor Parlicov said.