On December 20, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation on Moldova.
Moldova has experienced a period of relative macroeconomic and financial stability since the 2014 banking crisis. Growth has returned and, while moderating somewhat, is expected to be around 3% next year. Inflation is forecast to return to target in 2018, following a pickup in 2017.
The banking sector has been stable, the fiscal performance has improved and Moldova’s external position has strengthened. The outlook, however, is still subject to substantial risks.
Following the Executive Board discussion on Moldova, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, said:
- The Moldovan authorities have developed a comprehensive program—to be supported by a three-year arrangement under the Extended Fund Facility and the Extended Credit Facility—to strengthen the economy and address key vulnerabilities. The program aims at reinforcing the recent economic stabilization and advancing a broad structural reform agenda, particularly in the financial sector. Strong commitment to sound policies and a significant improvement in economic governance will be crucial to raising long-term growth prospects.
- Significant upfront progress has been made in enhancing the resilience of the banking sector and address weaknesses that gave rise to the 2014 crisis. Following the recent strengthening of the legal and regulatory frameworks, efforts should now focus on effective implementation and timely enforcement actions to end supervisory forbearance in the face of shareholder or manager misconduct. An effective and independent court system and central bank will be critical to support these efforts.
- Fiscal policy has been recently constrained by falling revenues and tight financing. The 2016 budget deficit is set to widen modestly to support the nascent recovery, as debt remains sustainable despite the high fiscal cost of the banking crisis. Fiscal policy will need to be anchored in a sound medium-term framework and supported by measures to strengthen the revenue base and prioritize social and infrastructure spending.
- Monetary policy has been appropriate, geared toward maintaining low inflation in the context of a flexible exchange system. Since late 2015, inflationary pressures have significantly abated, allowing the National Bank of Moldova to loosen its tight monetary policy stance. Swift rehabilitation of the banking sector will be instrumental in unlocking healthy credit growth to productive sectors.
- Structural reforms along priorities defined in the National Developmental Strategy will improve competitiveness, attract investment, diversify the export structure, and achieve sustainable and inclusive economic growth. Strengthening the AML/CFT framework, the oversight of the national Anti-Corruption Center, and the framework for asset disclosure for senior officials will provide a further impulse to governance and transparency.
- International support under the framework of the Fund-supported program would lend financial and technical assistance as Moldova engages in deep reforms in the financial sector, give the authorities space to pursue a more balanced fiscal policy, and contribute to the build-up of international reserves.
Economic Indicators
| Table 1. Moldova: Selected Economic Indicators, 2010–17 1/ | ||||||||
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | |
| Projection | ||||||||
| I. Real sector indicators | (Percent change, unless otherwise indicated) | |||||||
| Gross domestic product | ||||||||
| Real growth rate | 7.1 | 6.8 | -0.7 | 9.4 | 4.8 | -0.5 | 2.0 | 3.0 |
| Demand | 9.1 | 8.2 | 0.4 | 6.2 | 3.6 | -3.2 | 1.7 | 2.5 |
| Consumption | 7.3 | 7.3 | 0.9 | 5.2 | 2.7 | -1.1 | 2.4 | 1.4 |
| Private | 9.5 | 9.3 | 1.0 | 6.5 | 3.2 | -2.3 | 0.9 | 1.7 |
| Public | -1.1 | -1.0 | 0.6 | -0.8 | -0.8 | -0.4 | 9.8 | -0.4 |
| Gross capital formation | 17.2 | 13.0 | 1.8 | 3.3 | 10.0 | -1.2 | -1.8 | 10.1 |
| Private | 20.3 | 16.4 | 1.6 | 2.7 | 7.7 | -2.4 | 1.0 | 3.6 |
| Public | 4.2 | -3.3 | 3.4 | 6.4 | 22.4 | 4.5 | -14.3 | 44.0 |
| Net Exports of goods and services | -14.8 | -12.1 | -2.8 | 0.0 | 0.3 | 11.7 | -0.9 | -0.6 |
| Exports of goods and services | 13.7 | 27.4 | 1.7 | 10.7 | 1.0 | 2.3 | 1.4 | 8.0 |
| Imports of goods and services | 14.3 | 19.7 | 2.2 | 5.5 | 0.4 | -4.3 | 1.2 | 5.1 |
| Nominal GDP (billions of Moldovan lei) | 71.9 | 82.3 | 88.2 | 100.5 | 112.0 | 122.2 | 132.7 | 142.8 |
| Nominal GDP (billions of U.S. dollars) | 5.8 | 7.0 | 7.3 | 8.0 | 8.0 | 6.5 | 6.7 | 7.0 |
| Consumer price index (average) | 7.4 | 7.6 | 4.6 | 4.6 | 5.1 | 9.6 | 6.9 | 4.9 |
| Consumer price index (end of period) | 8.1 | 7.8 | 4.0 | 5.2 | 4.7 | 13.5 | 3.5 | 4.7 |
| Unemployment rate (annual average, percent) | 7.4 | 6.7 | 5.6 | 5.1 | 3.9 | 4.9 | 4.7 | 4.5 |
| Poverty headcount ratio at national poverty lines (percent) | 21.9 | 17.5 | 16.6 | 12.7 | 11.4 | |||
| Saving-investment balance | (Percent of GDP) | |||||||
| Foreign saving | 9.4 | 12.8 | 8.4 | 5.8 | 6.5 | 5.0 | 3.5 | 5.0 |
| National saving | 13.2 | 10.5 | 15.3 | 17.2 | 18.2 | 19.3 | 18.8 | 19.1 |
| Private | 11.5 | 9.3 | 13.7 | 15.4 | 15.7 | 17.6 | 18.3 | 16.2 |
| Public | 1.8 | 1.2 | 1.6 | 1.8 | 2.6 | 1.7 | 0.5 | 2.8 |
| Gross investment | 22.6 | 23.3 | 23.6 | 22.9 | 24.7 | 24.2 | 22.4 | 24.1 |
| Private | 18.7 | 19.8 | 20.1 | 19.4 | 20.4 | 19.8 | 18.8 | 19.0 |
| Public | 3.9 | 3.5 | 3.6 | 3.6 | 4.3 | 4.5 | 3.6 | 5.1 |
| II. Fiscal indicators (general government) | ||||||||
| Primary balance | -1.9 | -1.7 | -1.6 | -1.4 | -1.4 | -1.5 | -2.2 | -2.3 |
| Overall balance | -2.6 | -2.5 | -2.3 | -1.9 | -1.9 | -2.3 | -3.5 | -3.7 |
| Stock of public and publicly guaranteed debt | 30.5 | 29.0 | 30.9 | 29.6 | 36.0 | 45.0 | 45.7 | 46.86 |
| III. Financial indicators | (Percent change, unless otherwise indicated) | |||||||
| Broad money (M3) | 13.4 | 10.6 | 20.8 | 26.5 | 5.3 | -3.0 | 9.8 | … |
| Velocity (GDP/end-period M3; ratio) | 1.9 | 2.0 | 1.8 | 1.6 | 1.7 | 1.9 | 1.9 | … |
| Reserve money | 8.9 | 21.8 | 19.7 | 27.0 | 6.3 | 7.1 | 5.7 | … |
| Credit to the economy | 12.7 | 15.0 | 16.1 | 18.8 | -3.3 | 3.2 | -0.3 | … |
| Credit to the economy, percent of GDP | 37.4 | 37.6 | 40.7 | 42.5 | 36.8 | 34.9 | 32.0 | … |
| IV. External sector indicators | (Millions of U.S. dollars, unless otherwise indicated) | |||||||
| Current account balance | -545 | -900 | -610 | -460 | -520 | -322 | -236 | -350 |
| Current account balance (percent of GDP) | -9.4 | -12.8 | -8.4 | -5.8 | -6.5 | -5.0 | -3.5 | -5.0 |
| Remittances and compensation of employees (net) | 1,273 | 1,733 | 1,893 | 2,098 | 1,937 | 1,386 | 1,316 | 1,409 |
| Gross official reserves | 1,718 | 1,965 | 2,515 | 2,821 | 2,157 | 1,757 | 2,075 | 2,433 |
| Gross official reserves (months of imports) | 3.4 | 3.9 | 4.7 | 5.4 | 5.4 | 4.7 | 5.1 | 5.5 |
| Exchange rate (Moldovan lei per USD, period avge) | 12.4 | 11.7 | 12.1 | 12.6 | 14.0 | 18.8 | 20.0 | … |
| Exchange rate (Moldovan lei per USD, end of period) | 12.2 | 11.7 | 12.1 | 13.1 | 15.6 | 19.7 | 20.5 | … |
| Real effective exch.rate (average, percent change) | -6.1 | 5.9 | 4.1 | -2.3 | -3.0 | -3.4 | -2.0 | … |
| Real effective exch.rate (end-year, percent change) | 7.3 | 9.4 | -2.9 | -3.7 | 1.6 | -2.5 | -1.6 | … |
| External debt (percent of GDP) 2/ | 80.9 | 76.9 | 82.7 | 84.5 | 84.9 | 98.9 | 100.4 | 101.2 |
| Debt service (percent of exports of goods and services) | 17.8 | 15.8 | 15.0 | 17.6 | 15.5 | 13.6 | 26.1 | 22.0 |
| Sources: Moldovan authorities; and IMF staff estimates. | ||||||||
| 1/ Data exclude Transnistria. | ||||||||
| 2/ Includes private and public and publicly guaranteed debt. | ||||||||
Source: IMF
