Optimistic economic growth forecast for Moldova in 2017

The economic growth in Moldova in 2017 can exceed the Government’s forecast of 3-4% and will be mainly based on government investment. For the country to reach a good economic situation, it needs an economic growth of 8-10% during ten years in a row, project manager of the German Economic Team Moldova Jorg Radeke stated for IPN.

Jorg Radeke noted that the Government in 2016 had to reduce a lot the costs as the foreign partners froze the financial support. This year the spending was by 10% lower than the planned budget expenditure. If the Government spends the planned amounts in 2017, this will stimulate economic growth.

In 2016, the costs represented 33% of the GDP, while in 2017 the spending is projected to be of 38%, up 5 percentage points. According to the expert, these additional costs will go on investment in roads, schools, public procurement, pensions, salaries and others, which is favorable for the economy. This will serve as the basis for economic growth in 2017.

Jorg Radeke said it is not so relevant to compare the planned budgets year on year. It is the spending that should be followed, namely how much of the planned amounts was spent. In 2016, the Government plans to spend about 38% of the GDP, which is much more than earlier. At a certain moment, it understood that there is no money because the grants and cheap loans were frozen and thus had to cut costs.

The expert stated that the economy consists of the following elements: consumption – investments – government spending – external trade. If the government spending increases substantially for building roads, for example, the salaries in the building sector will also growth. The people wil have more money that can be spend on consumption. Surely, this is not the right economic growth model needed by the country. It should tend to an economic model based on investment and export.

To attain an economic growth of 8-10% during longer periods, Jorg Radeke said reforms that are painful at the beginning for the ordinary people and groups of interests are needed.

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