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