“Expert-Grup” highlights constrains that can jeopardize economic growth

Despite the positive economic dynamics of the recent months, there are signals that the economic growth will slow down in the nearest future. The factors that will limit the economic expansion are determined by the well-known flaws of the national economy, low competitiveness and labor productivity, unfavorable weather conditions, as well as the repercussions of the autumn elections for the business environment. The conclusions were presented by experts of the Independent Think Tank “Expert-Grup” in a press conference at IPN where there was launched the quarterly publication “Real Economy”.

“Expert-Grup” executive director Adrian Lupusor said the Center’s experts identified a number of constrains that can jeopardize economic growth. These derive from the low competitiveness of the Moldovan economy amid the appreciation of the national currency that will lead to a trade deficit and current account deficit in parallel with low labor competitiveness that will affect exports as well. The lack of rainfall could compromise particular crop harvests in agriculture even if the agricultural production, especially the animal one, saw upward trends in the first months. The risk of the electoral factors will materialize into the reluctance of private companies to invest, which will cause repercussions for bank lending. In addition, a series of pre-electoral initiatives that have already been launched, such as the “Good Roads for Moldova” program or the “First House” program, all lacking a clear budget coverage, threaten to affect the stability of public finances.

As to the economic evolution per sectors, Alexandru Fala, director of the program “Monetary Sector and Economic Modeling” at “Expert-Grup”, said a minor growth of 1% was seen in agriculture in the first quarter of this year following a growth of about 20% in the fourth quarter of 2017. The animal production and animal breeding sector advanced slightly. The growth in the industrial sector was determined by the processing industry that grew by over  10% in the first four months of this year. As regards domestic trade, the dynamics are good, with wholesale trade being the only declining component.

Economist Iurie Morcotylo said the real salary in the first three months of this year rose by over 7%. Remittances in the period grew by over 20%. The amounts collected into the national public budget increased by 10%, in contrast to 20% last year. The costs grew slowly owing to the uncertainty as to the EU financing. The costs are transferred to the second half of the year, for electoral initiatives.

According to economist Dumitru Pyntea, the national currency in the first three months of this year appreciated by about 15% compared with the corresponding period last year. The leu-dollar exchange rate witnessed the lowest level in the past three years, decreasing to about 16.4 lei per dollar. The volume of loans in the banking system declines because the loans released earlier are repaid too swiftly.

As regards foreign trade, expert Vadim Gumene noted that this sector in the first months grew based on exports that rose by over 28%. Exports to the EU intensified and exports to Russia were partially resumed following the lifting of restrictions on import.

According to “Expert-Grup”, the Early Warning Index calculated quarterly by it should be taken into account when making economic policy decisions. The index enables to predict the situation in the economy and the tendencies. This consists of six indicators that approximate the GDP, but are presented about four months earlier.

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