State of the Country Report 2019: social and economic inequalities are decreasing, but there are major risks that in the long term they may diminish

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Publishing date: Wednesday, 06 November 2019
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Today, November 7th, in the framework of the 7th Edition of the Annual International Conference MACRO 2019, the Independent Think-Tank Expert-Grup in partnership with the Friedrich-Ebert-Stiftung Moldova is launching the State of the Country Report 2019 – a comprehensive radiography of the country's economic and social situation. This year's edition focuses on the impact of the social and economic inequalities on the state of the country, attempting at identifying a set of strategic measures that will ensure income convergence and provide support to vulnerable groups of people.

 

According to the State of the Country Report, in 2018 – 2019, the annual growth rates of the Gross Domestic Product (GDP) have stabilized at around 4 per cent, without any significant structural changes in the national economy. Thus, the growth paradigm remains the same: household consumption accounts for over 80 per cent of GDP and depends strongly on remittances, which tend to shrink in the long run and lose their capacity of ensuring economic growth and attracting investments.

”Remittances are becoming more uncertain, and tend to shrink in the long-run, and the main factor that has attracted the investments so far – cheap labour force, is undermined by emigration, inefficient education system and wage growth outstripping productivity. The situation is further worsened by the reduction of the labour productivity, the decrease in the formal employment and the increase in the informal economy. Thus, if Moldova does not identify sustainable sources of value added investment and exports in the coming years, the economy will deplete its ability to create jobs, income for the population and revenue for the public budget, and the economic growth will tend to become lower and less certain”, stated Adrian Lupusor, the executive director of the "Expert-Grup" and co-author of the report.

The lack of sustainable economic growth and the high level of the informal economy consequently determine the lack of a large tax base, which puts great pressure on the social protection system, widening the gap between different categories of population. "The level of inequalities remains a major challenge in Moldova and requires economic and fiscal policies to be adapted to this reality. Although the level of inequality is not much higher than that of the countries in the region, the problem derives from the limited capacity of the social protection system to address this challenge. The causes are related to the fiscal and budgetary space, limited by the increased level of the informal economy and the fiscal and budgetary electoral policies in the context of the 2018 Parliamentary elections. In addition, the process of diminishing inequalities might be permanently compromised, in the context of the demographic aging phenomenon, and in the medium and long term, these processes might further exacerbate the level of inequalities, because of the decreasing share of the economically active population and the increasing share of pensioners”, mentions Iurie Morcotîlo, economist at the Independent Think-Tank Expert-Grup and author of several publications in the field of social-economic inequalities.

Experts reiterate that although policies aimed at improving competitiveness must be intense and active, they should not compromise on sustainable development goals.

"Given the acute lack of investment, in recent years, the Moldovan governments have given priority to policies aimed at supporting the business environment and have marginalized a number of important objectives related to sustainable development, especially environmental protection, investment integrity, employee safety and human rights in general", mentions Adrian Lupușor, the executive director of the Independent Think-Tank Expert-Grup, in his opening speech. The expert believes that "the priorities of the Government should not aim at attracting investments at all cost, by granting citizenship to investors without appropriate examination, by means of capital and tax amnesties, by loosening the regulatory framework and that of the institutions of labour or environmental protection, but through a balanced economic policy, which will stimulate by all available means possible investments, that would contribute to the long-term development of the country".

Video registration of the event and a photo gallery can be accessed below.

Download the MACRO 2019 brochure (en)  Download the report (en)

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