The slowdown in the economic growth is becoming more obvious, as over the last quarter of 2011 the retail trade and services provided to firms embarked on a downward trend. We anticipate that 2012 will be a very difficult year for Moldova. The external environment, which had been so favorable during the last 2 years, poses significant risks, both economical and political, for our country.
At the end of the year, the statistical data denote a less favorable situation for the Republic of Moldova, with risks turning into real facts and lowering economic performance . All the GDP components slowed down their growth paces, the biggest contribution owing to the stagnation of the investment activity. Thus, both local and foreign investors became more reluctant, investing less and less in the recent months. Although the final consumption is consolidated its position as the most important economic growth determinant, it nevertheless remains sensitive to regional economies’ fluctuations and grew at a lower rate during the third quarter of 2011.
This is the fourth annual economic radiography made by the Independent Think-Tank EXPERT-GRUP. We find that the economic growth in 2011 was strong and improved structurally, but consumption continued to be the main growth factor. While the AEI-2 member parties spent most of the time in controlling and checking each other, the prices kept rising and the external risks got even more acute. The strong economic growth in 2011 was accompanied by a high inflation which did not hinder the growth of bank loans and the Government promoting the policy of a lower budget deficit. But the macroeconomic successes were poisoned by new corporate scandals with major economic, social, and political impact. The publication presents the most important economic trends and risks, as well as the most successful and erroneous economic policies in 2011.
The most important issues covered by the this issue of the Real Economy are related to the consumers’ rights which have recently became a heated topic of discussion, the main financing sources of consumption, the causes of lowering the growth of budgetary revenues, as well as the trade expansion.
As this issue of the Real Economy shows, we are living a hot political autumn, despite the cold weather outside. This correlates with some warring economic trends nationally and regionally. Important issues covered in this edition are related to the slow and deficient process for competition legislation, the implications of the new fiscal policy, as well as the risks hampering the positive trend in foreign trade followed during the recent months.
On the first sight the Moldovan economy is flourishing. Not only had Moldova had a high economic growth in Q2'11, but, more importantly, it looks like a healthy growth. However, it is much easier to recover, even at a high rate, than to keep a healthy growth in the long-term. In this respect, as shown in this edition of the Real Economy, the Moldovan economy is still fragile, with serious weaknesses and challenges lurking in the shadows.
The economic growth of 8.4 percent in Q1’11 was outstanding, even though Expert-Grup was more optimistic than the Government when revising upward the forecast for 2011 in May this year. As the 20th edition of the Real Economy shows, the households’ consumption remained the main driver of growth, fueled by increased amounts of remittances. At the same time, the economic perspectives seem to be optimistic as further suggested by trends noticed in the private sector.
In the EU we trust. Or so many major political statements, strategic documents and crucial reforms could well start and end... at least, if we judge by the words of Moldovan leaders starting 2005. Indeed, the last year has so far appeared as culmination of the Moldova’s stride on its euro-approximation path: Moldova has become a Mecca for the EU and Western leaders and now can boast the title of the “democratic success story” aptly dubbed by the US Vice-President Joseph Biden upon his visit to Moldovan capital.
The political infightings should not eclipse the economic reforms which are promoted by the Government. Particularly, it is related to the modification of privatization procedures in terms of their simplification, allocation of more competences to local public administrations and the protection of public interests. Besides that, this edition of the Real Economy covers the analysis of surprising growth in industrial production, the social impact of the economic crisis and the raising of quotas for wines.
In 2010 Moldovan economy grew faster than other economies in the region, surpassing Government's, NBM's, IMF's and EBRD's expectations. However, the structure of registered economic growth reflects Moldova returning to the pre-crisis growth model based on consumption. As prior to the 2009 crisis, in 2010 the gross value added increased slower than taxes on goods and imports. Our revised forecasts indicate a GDP growth up to 5.7% in 2011.