Economy of Moldova Displays Growth despite Rising Risks
OREANDA-NEWS. February 17, 2012. This has been stated by the IMF mission chief in an interview IMF Survey online. According to him, the greater investments and more active structural reforms are required to maintain inclusive growth in Moldova.
Moldova managed to grow by 6 percent in 2011 after growing by more than 7 percent in 2010. this strong performance is explained by the government’s successful policies to stabilize the economy and improve the business climate. Private consumption, investment, and exports expanded strongly. Exports, in particular, rose by over 40 percent in 2011 compared to a year ago, aided by new production capacity and improved market access to the EU and the Commonwealth of Independent States. Unemployment also came down and now stands at 5-6 percent, the lowest level since 2008.
As speaking on the IMF-supported program, which was approved in early 2010, Gueorguiev has said it has four main objectives. First, restore fiscal sustainability while at the same time raise funds for investment and targeted social assistance. Second, keep inflation under control and rebuild international reserves to cushion the economy from external shocks. Third, maintain financial stability by strengthening the framework for supervising banks. And, last but not least, improve the economy’s ability to grow through structural reforms. The IMF mission chief has stressed that Moldvoa achived very good results.
The budget deficit has declined by two-thirds since 2009, largely because of a reduction in government spending by over 6 percentage points of GDP. At the same time, public investment has increased by nearly 20 % in real terms. Spending on programs for social assistance has also been increased considerably. The National Bank of Moldova’s new inflation targeting framework has strengthened its ability to control inflation.
After years of 10% inflation, it fell to about 8 % in 2010–11. Gross international reserves reached USD 2 billion, a historic high. At the same time, authorities of Moldova have a lot to do yet, Nikolay Gueorguiev has noted. It is to complete the process of fiscal consolidation.
The budget deficit is expected to fall below 1% of GDP by the time the IMF-supported program winds down. The plan is also to bring down inflation close to the central bank’s target of 5 %––by strengthening the inflation targeting framework. Finally, more efforts to be made to facilitate restructuring of nonperforming bank loans and improve transparency regarding bank ownership.