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MEGA - Moldova Economic Growth Analysis № 16 / 2017

Author(s): Adrian Lupuşor,Alexandru Fală,Dumitru Pîntea,Iurie Morcotîlo,Sergiu Gaibu,Vadim Gumene / Language(s): English

The economic growth of 2016 was higher than forecasted, but lower than the optimal level. The Gross Domestic Product of the Republic of Moldova increased by 4.1% in 2016, exceeding the forecasts from the previous MEGA publication (3.4% according to the baseline scenario). This evolution was determined by the higher-than-expected increase in consumption and exports of goods and services, which grew quicker than imports. These developments led to higher-than-expected increases in services and industry. At the same time, the slumps in investment activity and constructions were milder then expected. Also, the recovery of agriculture after the 2015 drought gave impetus for the economic growth in 2016. However, the GDP growth of 4.1% is much lower than the optimal level (~7%), especially given the low comparison base (in 2015 the GDP decreased by 0.5%). Moreover, this level was not much higher than in other countries from Central and Eastern Europe that have a GDP per capita several times bigger than Moldova: Romania grew quicker (+4.8%) with a GDP per capita of almost 5 times higher, Bulgaria grew by 3.4% with a GDP per capita 4 times higher, and Slovakia - by 3.3% with a GDP per capita 9 times higher.

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MEGA - Moldova Economic Growth Analysis № 21 / 2020

Author(s): Adrian Lupuşor,Alexandru Fală,Dumitru Pîntea,Iurie Morcotîlo,Tatiana Savva,Vadim Gumene / Language(s): English

After a relatively favorable economic year, 2020 brings more macroeconomic challenges, with major risks for the public finance system. Overall, the economic growth in 2020 will be tempered compared to the result recorded in 2019. Thus, after the economy grew by about 4.5-5% in 2019, in 2020 the GDP will advance by about 3.5-4%. Most economic sectors will show relatively slow growth rates in 2020. The most significant slowdown compared to 2019 will be registered in the construction sector. The sector that was the leader of growth in 2019, with an increase in value added close to 20%, in 2020 will advance by only 2%. On the other hand, domestic trade will remain on a positive track and will ensure the largest contribution to GDP growth in 2020. A first cause of this anticipated economic slowdown for 2020 is the complete dissipation of the effects of the fiscal reform implemented in the last quarter of 2018 (reduction of the social security contribution rate paid employers). Although the relaxation of the monetary policy and the increase of consumption will stimulate the dynamics of private investments, they will no longer benefit from the impulse generated by the mentioned tax reform. Also, the slowing of the economic advance in the EU (the main trading partner of the Republic of Moldova) will lead to the moderation of the rhythms of growth of Moldovan exports, with negative repercussions on economic growth. The expansionary budgetary policy will stimulate the expansion of domestic demand, by increasing public investments and budgetary wages, but this will be mainly covered by imports, further aggravating the current account deficit problem. At the same time, the mechanism of financing the budget deficit could have negative implications on the economic growth if the Government will actively resort to loans from banks, which will undermine the lending of the real sector (crowding out effect).

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MEGA - Moldova Economic Growth Analysis № 22 / 2021

Author(s): Adrian Lupușor,Alexandru Fală,Dumitru Pîntea,Stas Madan,Tatiana Savva,Vadim Gumene / Language(s): English

The year 2020 was marked by the overlap of two major crises (the Covid-19 pandemic and the drought), causing the most severe recession in the last 20 years. Gross Domestic Product (GDP) estimated for 2020 shrunk by about 6.5%, because of the repercussions of the coronacrisis and drought that undermined the agricultural production. The restrictions imposed during the pandemic caused a sharp decline in sales, which determined companies to stop/postpone investments and cut on staff costs (reducing working hours and wages, technical unemployment and, to a lesser extent, personnel layoffs). This led to the contraction of consumption, which caused the boomerang effect on the private sector by lowering demand, and affected the national public budget through the under execution of revenues, especially from indirect taxes. Micro and small enterprises, in particular those that failed to diversify their markets and access foreign markets, were most affected. The most affected employees were those with low salaries, informally employed, mainly women, as well as the elderly and young people.

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MEGA - Moldova Economic Growth Analysis № 23 / 2022

Author(s): Alexandru Fală,Alexandru Rusu,Marina Soloviova,Stas Madan,Valeriu Prohniţchi / Language(s): English

In 2021, the Republic of Moldova recorded the highest GDP growth rate over the past three decades. While there are some structural improvements, this growth should not be the reason for an exaggerated optimism. After the deepest recession in the past 25 years (-7.4%) registered in 2020, the post-COVID and post-drought recovery made key contributions to the economic growth of 2021. The high base reached in 2021 will limit arithmetically the growth we anticipate for 2022 (below 3%). A slight acceleration of growth up to 3.5% is possible in 2023, but remains subject to multiple uncertainties.

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MEGA - Moldova Economic Growth Analysis № 24 / 2023

Author(s): Adrian Lupușor,Alexandru Fală,Ecaterina Rusu,Marina Soloviova,Stas Madan / Language(s): Romanian

The Moldovan economy faced an unprecedented complex of shocks in 2022, but thanks to adequate crisis management and external support, it entered 2023 stronger and with good prospects for rapid recovery. Stagflation amid the energy crisis, drought and war in Ukraine required rapid and exceptional policy interventions. Thus, within a few months, the Government adopted a series of important measures that allowed the shocks to be mitigated. To support demand amid the unprecedented increase in energy tariffs, the compensation mechanism was introduced to cover part of the energy tariffs for households; to support businesses, the capitalization of the programs implemented by the Entrepreneurship Development Organization was increased; to deal with the energy crisis, for the first time in the country's history, alternative sources of natural gas and electricity were used and natural gas stocks were made to strengthen energy security; to support budgetary stability, the Government switched to financing the budget deficit, primarily from external sources, available thanks to generous support from development partners. At the same time, macro-financial stability was maintained, thanks to a prudent monetary, foreign exchange and regulatory policy, which kept the national currency stable, the banking sector well capitalized and robust, and which allowed inflation to start to decelerate towards the end of 2022.

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Series:MEGA - Moldova Economic Growth Analysis

MEGA - Moldova Economic Growth Analysis № 16 / 2017

MEGA - Moldova Economic Growth Analysis № 16 / 2017

MEGA - Moldova Economic Growth Analysis № 21 / 2020

MEGA - Moldova Economic Growth Analysis № 21 / 2020

MEGA - Moldova Economic Growth Analysis № 22 / 2021

MEGA - Moldova Economic Growth Analysis № 22 / 2021

MEGA - Moldova Economic Growth Analysis № 23 / 2022

MEGA - Moldova Economic Growth Analysis № 23 / 2022

MEGA - Moldova Economic Growth Analysis № 24 / 2023

MEGA - Moldova Economic Growth Analysis № 24 / 2023