The recovery of the Moldovan economy has been slower than expected, as spillovers and headwinds from Russia’s war in Ukraine continue. This is one of the concisions of the IMF mission, led by Clara Mira, which conducted discussions in Chisinau during April 22-May 3 for the fifth reviews of Moldova’s programs under the ECF/EFF arrangement and the first review under the RSF arrangement, IPN reports.
Clara Mira said “real GDP grew by 0.7 percent in 2023, below the IMF’s 2 percent forecast at time of the last review. This was due primarily to a weaker recovery of domestic demand, particularly private consumption and investment.
“Recovery should continue in 2024, with growth of 2.6 percent, again less than previously projected. Risks include possible renewed energy shocks or a new wave of refugees. Faster-than-anticipated growth in trade partners, faster progress towards EU accession, and acceleration of structural reforms are upside risks.
“The 2024 budget strengthens social safety nets, further sustains energy security, and supports growth-enhancing investment and reforms. With inflation within the NBM’s target band since November, the current monetary policy stance is appropriate. Exchange rate flexibility and preserving sufficient foreign exchange buffers will be critical to address shocks. Monetary policy should remain focused on preserving price stability.
“Program performance has been sound and broadly on track, although with some delays in structural reforms. The authorities met all end-December quantitative performance criteria. End-December structural benchmarks on strengthening tax administration and completing a triage of state-owned enterprises were met. The Law on Climate Action was adopted. However, agreed reforms to strengthen the institutional autonomy and governance of the NBM (December) and to establish an anti-corruption adjudication infrastructure, including a credible process for the selection of judges (March) are being delayed, although work is ongoing.
The IMF team will continue its discussions in the context of the Fifth ECF/EFF and First RSF Reviews with the goal of reaching a staff-level agreement in the near term. The team reaffirms its commitment to support Moldova.
