Moldova

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In 2015, Moldova’s econ­omy is ex­pected to turn to re­ces­sion of be­tween 1.0% and 2.0%, ac­cord­ing to fore­casts of the World Bank, the Euro­pean Bank for Re­con­struc­tion and Devel­op­ment, and the In­ter­na­tional Mon­e­tary Fund. Di­min­ish­ing re­mit­tances and ex­ports are among the key neg­a­tive fac­tors that will weigh on Moldova’s eco­nomic devel­op­ment in 2015. The down­trend in re­mit­tances and ex­ports is re­flect­ing the eco­nomic re­stric­tions im­posed by Russia and the slow re­cov­ery of the other CIS coun­tries, which are among Moldova’s lead­ing ex­port mar­kets.

In 2014 Moldova's econ­omy man­aged to over­come the neg­a­tive ex­ter­nal and in­ter­nal fac­tors and reg­is­tered a growth, al­though slower than in the pre­vi­ous year. The econ­omy suf­fered from the Rus­sian trade em­bargo, the wors­en­ing busi­ness cli­mate in one of its main trad­ing part­ners - Ukraine, the con­tin­u­ing em­i­gra­tion and per­sist­ing cor­rup­tion prac­tices. The Moldovan econ­omy con­tin­ues to rely on re­mit­tances from em­i­grants and nat­u­ral gas de­liv­er­ies from Russia, while the eco­nomic pro­gramme of the new govern­ment seeks eco­nomic up­swing through closer in­te­gra­tion with the Euro­pean Union.

Moldova is the SEE coun­try that mostly re­lies on re­mit­tances from em­i­grants. In 2014, the re­mit­tances ex­ceeded 1.6 bil­lion euro, thus ac­count­ing for more than 24% of the coun­try's GDP, ac­cord­ing to the World Bank. Re­mit­tances from Russia ac­counted for 33.1% of the to­tal, fol­lowed by in­flows from Italy with a 19.3% share, and Ukraine with 15.4%. The drop in the Rus­sian rou­ble may sig­nif­i­cantly cut the re­mit­tances value in 2015 and will put pres­sure on the over­all eco­nomic per­for­mance of Moldova.

In terms of do­ing busi­ness reg­u­la­tions, Moldova man­aged to jump to the 63th place in World Bank's Do­ing Busi­ness 2015 re­port from the 82nd po­si­tion in the pre­vi­ous year's rank­ing. The coun­try im­proved sig­nif­i­cantly its po­si­tion in the Get­ting Credit, Pay­ing Taxes, and Start­ing a Busi­ness cat­e­gories. Ac­cord­ing to the re­port, Moldova made start­ing a busi­ness eas­ier by abol­ish­ing the min­i­mum cap­i­tal re­quire­ment, and fa­cil­i­tated com­pany taxes pay­ments by in­tro­duc­ing an elec­tronic sys­tem for fil­ing and pay­ing so­cial se­cu­rity con­tri­bu­tions.

Moldova also im­proved its po­si­tion in the Global Com­pet­i­tive­ness Re­port 2014-2015 pub­lished by the World Eco­nomic Fo­rum. The coun­try was placed 82nd out of 144 economies, while in the pre­vi­ous year's re­port it was 89th out of 148 coun­tries. The lead­ing is­sues lim­it­ing Moldova's com­pet­i­tive­ness are cor­rup­tion, pol­icy in­sta­bil­ity, and in­ef­fi­cient govern­ment bu­reau­cracy.

The coun­try's GDP in­creased by a real 4.6% year-on-year and to­talled 111.5 bil­lion lei in 2014, ac­cord­ing to pre­lim­i­nary data of the Na­tional Bureau of Sta­tis­tics of the Re­pub­lic of Moldova (NBS).

Fi­nal con­sump­tion in­creased by an an­nual 9.3% in nom­i­nal terms to 123.66 bil­lion lei

in 2014. Gross cap­i­tal for­ma­tion went up by 16.5%, con­tribut­ing 25.9% to the GDP. Both im­ports and ex­ports grew - by 8.6% and 7.8%, re­spec­tively.

The gross value added (GVA) gen­er­ated by the na­tional econ­omy in­creased by a nom­i­nal 12.2% on the year in 2014 and to­talled 93.97 bil­lion lei. The in­dus­trial sec­tor grew by an an­nual 9.5% in terms of value, but its share in the GVA struc­ture di­min­ished to 16.7% from 17.1%. The ser­vices sec­tor recorded an 11.8% an­nual in­crease, slic­ing a 63.8% share in the GVA, down from 64.1% in the pre­vi­ous year. The agri­cul­tural sec­tor reg­is­tered an an­nual rise of 15.6%, thus in­creas­ing its share in the GVA to 15.2%, from 14.8% in 2013. The con­struc­tion industry marked the high­est nom­i­nal growth, of 18.5% and its share in the GVA notched up to 4.3% from 4.0% in 2013.

In­dus­trial out­put went up by 7.3% on the year in 2014. The man­u­fac­tur­ing sec­tor grew by 8.5%, fol­lowed by the elec­tric­ity, wa­ter and gas sup­ply and min­ing sec­tors, which went up by 4.4% and 0.2%, re­spec­tively.

The out­put of the man­u­fac­ture of veg­etable and an­i­mal oils and fats more than dou­bled, while the sharpest de­cline, of 39.6%, was posted by man­u­fac­ture of to­bacco prod­ucts.

Moldova reg­is­tered av­er­age an­nual in­fla­tion of 5.1% in 2014, com­pared to 4.6% in­fla­tion a year ear­lier. In 2014, the high­est an­nual in­crease in consumer prices, of 16.8%, was reg­is­tered in the tourism sec­tor, while the high­est de­fla­tion, of 8.4%, was recorded by veg­etable oil.

Un­em­ploy­ment in Moldova nar­rowed to 3.5% of the to­tal labour force in the fourth quar­ter of 2014 from 4.1% a year ear­lier, ac­cord­ing to data of NBS.

The em­ployed population aged 15 years and older was 1.1 mil­lion in the last quar­ter of 2014, down by 3.8% y/y. Loans to the non-govern­ment sec­tor to­talled 40.8 bil­lion lei as of end-2014, down by an an­nual 3.2%, ac­cord­ing to BNM.

Loans to non-fi­nan­cial cor­po­ra­tions sank by an an­nual 6.4% to 34.9 bil­lion lei, while house­hold loans went up by 21.2% year-onyear, reach­ing 5.9 bil­lion lei.

The coun­try's gross ex­ter­nal debt de­creased, to­talling 6.495 bil­lion U.S. dol­lars at the end of De­cem­ber 2014. It nar­rowed by 2.7%, or 178 mil­lion U.S. dol­lars com­pared to De­cem­ber 2013. In com­par­i­son to Septem­ber 2014, the gross ex­ter­nal debt fell by 333 mil­lion U.S. dol­lars.

As of end-De­cem­ber 2014 long-term li­a­bil­i­ties amounted to 4.3 bil­lion U.S. dol­lars, or 65.6% of the to­tal debt, and short-term li­a­bil­i­ties to­talled 2.2 bil­lion U.S. dol­lars, equal to 34.4% of the to­tal debt.

The cur­rent ac­count deficit widened to 451.1 mil­lion U.S. dol­lars in 2014 from 398.6 mil­lion U.S. dol­lars in 2013, ac­cord­ing to cen­tral bank sta­tis­tics data.

The trade deficit stood at 2.977 bil­lion U.S. dol­lars in 2014, com­pared to 3.064 bil­lion U.S. dol­lars in 2013, ac­cord­ing to BNM.

In 2014 Moldova ex­ported most of its prod­ucts and ser­vices to Ro­ma­nia, with ex­ports to­tal­ing 434.04 mil­lion U.S. dol­lars or 18.6% of the to­tal ex­ports, fol­lowed by Russia, with 18.1% or 423.7 mil­lion U.S. dol­lars, and Italy with 10.4% or 243.4 mil­lion U.S. dol­lars. Most of Moldova's im­ports came from Ro­ma­nia – 803.08 mil­lion U.S. dol­lars, Russia fol­lowed with 717.2 mil­lion U.S. dol­lars, and Ukraine was third with 546.37 mil­lion U.S. dol­lars.

Source: In­ter­na­tional Mon­e­tary Fund (IMF) World Eco­nomic Out­look Data­base – April 2015

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