OREANDA-NEWS. May 23, 2014. The European Bank for Reconstruction and Development (EBRD) reduced the 2014 economic growth forecast for Moldova to 2 per cent from 3.5 per cent, as predicted in last January, according to an EBRD report on the regional economic outlook.

After an impressive growth of 8.9 per cent in 2013, the Moldovan economy will slow down, including due to the negative impact of the conflict between Russia and Ukraine, two of Moldova’s biggest trading partners. EBRD expects a fall in Ukraine's gross domestic product (GDP) by 7 per cent against the January’s growth forecast of 1.5 per cent. The European financial institution expects zero growth of the Russian economy against the more optimistic forecasts of 2.5 per cent made earlier this year.

The growth prospects in the region were significantly damaged compared to January 2014, as a result of the Russian-Ukrainian crisis. A return to a 1.9-per cent advance in 2015 is possible, provided that the conflict between Russia and Ukraine does not escalate.

"Moldova registered a record 8.9 per cent growth last year, following a recovery in agriculture and industry, as well as trade and industry growth. The volume of attracted investments, including foreign direct investment, has remained modest due to a weak business environment and corporate governance-related problems in the banking sector, " says the EBRD report.

The financial institution warns of the low level of remittances to individuals, a phenomenon that has been felt by the end of 2013, although figures for 2013 increased against 2012. The Ukrainian crisis and the weakening of the trade relations with Russia could further affect transfers and exports, consider experts.

The signing of the Association Agreement with the European Union, including the Free Trade Accord, scheduled for 27 June, will increase trade with the EU and help redirect exports on medium term, note EBRD experts.

"The parliamentary elections in 2014 and the financial sector problems introduce elements of uncertainty. Economic growth is expected to slow to 2 per cent this year and speed up to 4 per cent in 2015," reads the EBRD report.

The International Monetary Fund (IMF) has recently revised the growth forecast down to 3.5 per cent from 4.0 per cent, as expected in October. A further escalation of the situation in Ukraine may have significant negative effects on the region, warned the IMF World Economic Outlook (WEO).

The Economics Ministry expects a 4-prer cent GDP growth in 2014. The World Bank is reserved in making forecasts. "Given the current difficulties in the external environment and the expected slowdown in agriculture performance, we anticipate the economic growth to be reduced to 2 per cent in 2014 and stabilise at 4-4.5 percent in 2015-2017," said World Bank Country Director for Ukraine, Belarus and Moldova Qimiao Fan.

The economists at the National Institute of Economic Research are more optimistic, expecting an increase of 3.7 per cent for the Moldovan economy in 2014. The Expert Group Independent Analytical Centre predict a rise of 2.1 per cent and, in the case of pessimistic scenario, it could be as low as 0.5 per cent.