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Economic Policies on May 2–22, 2005
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e-journal #51 |
Prices
Moldova registered a 1.4 percent inflation rate in April. The cumulative rate for the first four months of this year was 5.5 percent, compared with December 2004. The inflation rate this year could exceed the 12.5 percent rate registered in 2004, if the current tendencies do not change.
The food consumption index rose last month by 1.8 percent, the index of manufactured goods rose by 1.3 percent, and tariffs of services provided to population increased by 0.8 percent.
Prices of fresh fruits rose by 17.3 percent, fresh vegetables by 6.2 percent, sugar by 3.5 percent, potatoes by 2.4 percent. Prices of fuels grew by 3.7 percent (including petrol and Diesel oil by 4.5 percent, bottled liquid gas by 3.2 percent) and drugs by 1.6 percent. The public transportation tariffs rose by 7.8 percent.
The higher prices of fuels will unquestionably become a sure source to increase the inflation. The dangers for the planned ten-percent annual inflation rate and evolution of prices in the first four months undermine the efforts to comply with the annual inflationary parameters. The price of fuels represents a serious threat, being reflected in many of consumer prices. A higher price of fuels is not a bad news for the state budget at all costs, since it will bring higher excises.
Growths of oil quotations and imports with increased values have less positive influences on the deficit of current account and trade balance, which became deeper in the first quarter of this year. To combat the effects of a record rise of prices of fuels imported by Moldova, the government should reduce the excises and withdraw the VAT for excises. However, the executive did not work out any draft normative document in this regard.
Let’s remember that the inflation rate in April 2004 was 0.9 percent, while the cumulative rate for the first four months of 2004 was 3.9 percent, by 1.6 percentage points less.
Banks and insurance
Evolution of the bank system in Moldova registered positive tendencies in the 1st quarter of 2005. One of key indicators of the system, the 1st-degree capital, rose by 3.9 percent up to 2,54 billion lei. The growth was particularly due to bank incomes and encouraged the consolidation of the system in continuation.
The share of foreign investments in bank capital was 51.6 percent in the first quarter of 2005, and dropped by 0.8 percentage points compared with early this year.
Assets rose by 3.3 percent in the 1st quarter, up to about 13.76 billion lei. The central bank estimates that the growth of this indicator indicates an encouraging tendency and it is mainly financed by new deposits and incomes.
The cash rose by 12.2 percent up to 823.7 million lei, while money owed by banks and the National Bank of Moldova (BNM) grew by 2.5 percent up to 3.29 billion lei, securities increased by 41.6 percent up to 1.37 billion lei, other assets by 3.3 percent up to 1.2 billion lei.
The bank credits were diversified enough, with risks being distributed in all major economic sectors. Credits released to industry and trade held the largest share in the total of credit portfolio in late March — about 47 percent, followed by agriculture and food industry — 27.3 percent, loans for real estate, constructions and development 6.4 percent.
Deposits of individuals rose by 11.7 percent up to about 5.43 billion lei, compared with the first quarter of 2004.
The net income on bank system amounted to 109.4 million lei in late
March. Profitableness of assets and shareholder capital was 3.2 percent and, respectively, 16.6 percent, by 0.6 percentage points and 1.5 percentage points less than early this year. The decline was almost due to transformation of interest generating liquid means into liquid means which do not generate interest, and this eases their allocation for investment projects.
The latest report of the National Bureau for Statistics (BNS) shows that insurance companies in Moldova paid 174 million lei in damages (56 million lei to individuals) in 2004. This is a 44-percent growth compared with 2003.
Also, incomes from insurance policies rose by over 35 percent compared with 2003 up to 420 million lei last year, including 135 million lei from individuals. The total revenue of insurance companies in 2004 accounted for about 494 million lei.
Foreign trade
Moldova’s foreign trade turned over 13.15 billion lei (1.05 billion dollars) in the first four months of this year, that is 922.6 million lei more than in the similar period of 2004.
The imports were valued at 8.44 billion lei in January-April 2005, or 1.95 billion lei more or by 30 percent more than in the first four months of 2004. On the other hand, the exports declined by 18 percent, till 4.71 billion lei.
Overall the 15 customs offices in Moldova recorded more than 33,000 export/import operations in the past four months, and put the customs revenue at 986 million lei, or 30 percent more than during the same period last year.
On the other hand, the trade balance is worsening in continuation, while the trade deficit has almost doubled compared with January-February and rose up to 186.3 million dollars after three months. The trade deficit rose by about 75 percent compared with the first quarter of 2004.
The export growth in January-March this year was 6.8 percent, which is slower than in the first quarter of 2004, while the imports rose by about 29 percent.
Certainly, the growth of trade deficit is influenced by larger imports, generated in turn by rise of internal consumption. In other terms, Moldovans and the state consume more and raise larger debts.
The commercial policy of the government can also offer an explanation in this regard. As for example, the commercial facilities in effect for a range of imports are equivalent with a real appreciation of the national currency, which encourages the imports. The reduction of productivity of industry, which declined the volume of goods supplied to foreign markets, is another important factor which influenced the growth of trade deficit.
| Moldova’s foreign trade | 2003 | Q1’04 | Q1-Q2’04 | Q1-Q3’04 | 2004 | Q1’05 |
|---|---|---|---|---|---|---|
| Exports, millions USD | 1059,40 | 233,4 | 460,2 | 701,3 | 1317,48 | 249,4 |
| Imports, millions USD | 1728,29 | 338,0 | 773,5 | 1215,5 | 2130,56 | 435,7 |
| Trade balance deficit, millions USD | -668,89 | -105 | -313,3 | -514,2 | -813,08 | -186,3 |
Sourse: NBM, BNS
Moldova and the world
Moldova is ranked on the last but one place in the Commonwealth of Independent States (CIS) regarding the industrial growth. The industrial production in Moldova rose by 3.2 percent in the first quarter and it left behind only Kyrgyzstan, which posted a 4.7 percent industrial regress.
On the other hand, Moldova was ranked after Russia, which reported a 3.9 percent industrial growth, Armenia 5.1 percent, Ukraine, and Georgia by 7.1 percent, Kazakhstan 7.4 percent, Tajikistan 8.2 percent, Azerbaijan 10.3 percent. Belarus reported the highest industrial advance in the CIS, respectively 11.6 percent, in the first three months of this year..
The industrial growth in the CIS was five percent on average, by four percent less compared with nine percent in the first quarter of 2004.
The Moldovan industry grew by 3.2 percent in January-March in comparable prices, compared with 16.7 percent in the similar period 2004. According to official data, industrial enterprises, except for businesses based in Transnistria, made production worth about 4.4 billion lei (over 350 million dollars) in comparable prices in the first quarter of this year.
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