Economic year 2006 worst since 2000. Analysis by Info-Prim Neo

The economic year 2006 will be one of the worst years since 2000, which was the first year of economic growth after a long period of recession. Although the Government foresees a GDP growth rhythm of 4% by the end of 2006, independent experts are less optimistic and say that 3% is an acceptable good level. The main gaps of the GDP will be the industry and agriculture (fields with a share of almost 24% in the GDP), which will have negative results this year. Also, problems will be ascertained in the field with the highest share in the structure of the GDP – services (about 63%). Although the construction field will mark an increase of over 20%, and the communications are quickly developing, transportation will end the year with a decrease of 7%. Thus, the growth of the economy will be based only on services, excluding transportation and duties on products and imports. On the other hand, the agriculture, industry and transportation will negatively influence the national economy. Regarded from a different point of view, the economic growth will be to a great extent ensured by consumption. In the first semester of 2006, the final consumption contributed by 12% to the increase of the GDP in real terms. On the other hand, the imports of USD 2.1 bln, which exceed by about USD 1.3 bln the exports in the first ten months of 2006 will have an extremely negative contribution to the structure of the GDP. In the first semester of 2006, the imports contributed with minus 10.4% to the increase of the GDP. Therefore, as a result of the economic growth of 3%, as the independent experts foresee, or of 4% as the Government plans – 2006 will be the first year when the pace of the economic growth diminishes that much compared to the period 2000-2006. The growth of the GDP according to the official statistics during 2000-2006 is the following: 2000–increase by 2.1%; 2000-by 6.1%; 2002-by 7.8%; 2003 - by 6.6%; 2004 - by 7.4%; 2005 - by 7.1%; 2006 - by 4% or 3% (official and independent forecasts). [Shocks] One of the causes that contributed to the reduction of the economic growth pace is the economic shocks: the increase in price of the natural gas and imported oil products, as well as the fact that the Moldovan products were blocked on some markets. All these facts contributed to the boost of costs in economy, decrease of the output volume, reduction of exports and increase of crediting debts. However, the main problem in a well structured and reformed economy is the external shock which could have less influenced the economy and could have been overcome more easily than in Moldova. Therefore, the “diseases” affecting the Moldovan economy are not always external, but are to a great extent internal. It means that the economy continues to be kept in an “insalubrious” environment, which generates a series of internal crises that could have been avoided if the Government would have undertaken the necessary actions in order to eliminate possible “infection” foci. [Delayed reforms] Although a series of reforms were carried out, they did not convince the foreign capital to come to Moldova and contribute to the modernization and development of industry and economy. The extensive development, based on the unused capacities, could not ensure an industrial development, but just an increase of the production levels. Besides the fact that the industry did not benefit from investments, lacking a proper policy, it could not even use other levers – leasing schemes or attracting credits for the modernization. On the other hand, the geography of Moldova’s exports in 2006 is partially similar to that of the 90s. The economy is based on a limited number of external markets, and also on a limit number of products for export, thus the first shock is able to kneel down an entire industry and a significant part of agriculture. Another mistake of the Government was and continues to be the lack of a clear policy in what concerns the development and modernization of the infrastructure. The State Budget has social features, but uses populist tactics – aiming at increasing political rating. All these problems have a more negative influence on the economy than external shocks. The Government must learn this lesson once and for all. Otherwise, we will not move forward, we will only crawl, and the differences between us and the neighbour countries, especially western ones, will grow to unimaginable sizes.