The Transnistrian region is facing an unprecedented economic crisis. This year, the region’s GDP is expected to decrease by about 10-12% owing to the unfavorable conjuncture in Moldova and on the foreign markets, including the instability in Ukraine, the economic recession in Russia and the reduced demand in the EU. Such conclusions are contained in a study carried out by the Analytical Center “Expert-Grup”, IPN reports.

The study says the economic crisis provoked another two crises – social and budgetary. As a result of the social crisis, the population’s incomes declined by about 30%. This inevitably led to a drastic decrease in consumption, of 21-22%. For its part, the budgetary crisis was marked by a rise in salary arrears in the public sector and the private one (almost 4.5 times). Consequently, the region’s administration will have to continue the austerity measures, especially owing to the reduced capacity to accumulate fiscal incomes, determined by the economic decline.

The situation is worsened by the existence of an inefficient fiscal system based on direct taxation of companies and by the aggravation of the demographic crisis given that the number of pensioners exceeds the number of employed persons.

During the next two-three years, the Transnistrian region will be exposed to at least three major economic risks. First of all, exports will decrease faster, consumption will decline more drastically and hyperinflation will appear.

To stabilize the situation, “Expert-Grup” recommends implementing the Association Agreement’s provisions on foreign trade. It is very important for the region’s administration to give up burdening the private sector with financial obligations that normally should be fulfilled by the authorities as the continuation of such practices can lead to the exodus of private capital from the region. It is as important to reform the region’s fiscal system by eliminating the excessive concentration of direct taxation, by imposing VAT and by ensuring the compatibility between the fiscal systems from both sides of the Nistru River.