Economic Monitor

Economic Monitor Issue 12 | June 2020

Overview

  • We forecast GDP to decline by 6.3% in 2020 due to Corona crisis fall-out – deeper recession than after global financial crisis
  • Consumption, investments and exports all expected to decline; lower imports and higher government spending mitigate the negative effect on GDP
  • Economy to recover strongly by 5.5% in 2021
  • Inflation to decline to 1.3% in 2020 (after 4.8% in 2019) as economy runs below capacity
  • As such, monetary policy rate expected to decline further and to remain low for the foreseeable future
  • Exchange rate holding up so far amidst support by National Bank, but moderate depreciation possible in 2020 as economy opens up again
  • Increasing public expenditures and falling revenues results in a budget deficit of 5.4% this year – assuming the government can access external assistance
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Economic Monitor Issue 11 | January 2020

Topics:

  • New government. Socialist minority government still has to prove its commitment to reforms
  • Improving the business climate. Proposals in cooperation with the European Business Association
  • Reform concept for the Investment Promotion Agency. To make the Investment Promotion Agency more efficient, a target group-oriented approach should be followed
  • Intercity bus market in Moldova. A strategic planning process is required, which should include an integrated mobility master plan
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Economic Monitor Issue 10 | September 2019

Topics:

  • The new government. Big challenges ahead for the unusual coalition of pro-Russian Socialists and pro-EU block ACUM
  • Economic effects of the DCFTA. After 5 years of implementation we see a strong positive effect on exports to EU
  • Reorientation of Moldovan Investment Promotion Agency. The reorganization also requires an adaptation of tasks and processes
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Economic Monitor Issue 9 | January 2019

Topics:

  • Monetary policy normalisation in leading economies. So far no impact on Moldova, due to low foreign debt and prudent policy in recent years; nevertheless need to be cautious
  • Perspectives of agricultural insurance. Current system had only limited success, we recommend a simple alternative or a gradual reform
  • Household over-indebtedness. Some microfinance institutions contribute to increasing household over-indebtedness through irresponsible lending
  • Effect of the DCFTA. Strong exports growth to the EU, higher FDI from EU
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Economic Monitor Issue 8 | June 2018

Topics:

  • Exports development. EU market remains the key driver for Moldovan exports. EU direct investment boosts exports from the automotive sector (esp. wiring harness)
  • EU tariff rate quotas. Recommendation to increase quotas for grapes and plums
  • Transparency of consumer loans. Intransparent use of the annual percentage rate of charge for consumer loans. Legal framework and supervision should be strengthened
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Economic Monitor Issue 7 | January 2018

Topics:

  • Banking sector. Stabilisation reached after banking fraud, crediting of the private sector still decreasing
  • Foreign direct investment. Role of FDI for the economy so far underestimated, as a study of GET Moldova has shown
  • Economic reforms. Comprehensive reforms to be assessed positively; too early for final assessment
  • Increasing tax revenues. Increase in tax revenues can at least partly be attributed to reforms; positive example for structural reforms
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Economic Monitor Issue 6 | June 2017

Topics

  • Cluster development. The creation of clusters can contribute to industrial development and FDI attraction
  • External trade. Extension of trade with CIS is desirable, but should not happen at the expense of trade with the EU; criticism of the DCFTA is unfounded
  • Banking sector. Recommendations how to absorb excess liquidity in the banking sector
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