Monitoring→Economy→The Socioeconomic Environment

Prices

According to preliminary statistics, the inflation rate in May was 0.1 percent. The cumulative rate for the first five months of this year was 5.6 percent.

The food consumption index dropped by 0.3 percent, the index of manufactured goods rose by 0.6 percent, and services by 0.1 percent.

Prices of fresh fruits and vegetables registered the highest rises among food products in May, respectively by 15–20 percent on average, while the price of sugar grew by 7–10 percent.

The National Bank of Moldova and the government forecast an inflation rate between eight and ten percent for this year. On the other hand, economists say that the maintenance of the inflation

rate at this level will be “a provocation” for the government, since the inflation was higher than half of the official index for the entire year in the first five months of 2005.

Banks and insurance

Collections of insurance companies rose by 18 percent in the 1st quarter of 2005, compared with the same period of 2004. They raised insurance premiums worth over 101 million lei (8.4 million dollars).

Also, insurance societies paid 26.6 million lei (2.2 million dollars) in damages the same period.

These data are based on reports and statistics of 44 insurance companies working in Moldova.

According to data, 34 percent of the overall collections came from mandatory civil responsibility insurance and sales of Green Card policies. Most of money — about 33 million lei (2.64 million dollars) — was raised from optional estate insurance, including about 30 million lei from insurance of estate of enterprises.

Foreign trade

Moldova’s trade deficit rose 1.7-fold in January-April 2005, up to 293 million dollars.

The trade deficit grew up to 186 million dollars in the 1st quarter of 2005, and it rose by 55 percent in April alone, up to over 103 million dollars. The exports rose by only seven percent in the 1st quarter of 2005, while imports grew by about 30 percent. The importation/exportation coverage level in January-April was 54 percent, compared with 63.4 percent in the similar period of 2004.

The growth of deficit with Ukraine, which is the second key commercial partner of Moldova, is regarded as one of the main causes of the high trade deficit. Moldova registered 42.1 percent of its trade deficit in January-April with Ukraine.

Moldova’s deficit with the European Union accounted for 114.8 million dollars in January-April 2005, 92.2 million dollars with the CIS, 18.4 million dollars with Central and Eastern Europe, and 67.2 million dollars with other countries.

Statistics show that Moldova’s exports accounted for 174.8 million dollars in January-April 2005, by 12.4 percent more than in the first four months of 2004. On the other hand, the imports rose by 31.7 percent up to 637.4 million dollars. According to the National Bureau for Statistics (BNS), the trade deficit rose 3.5-fold compared with January-April 2001.

Moldova’s trade deficit has alarmingly increased and, if this tendency remains unchanged the entire year, we can be sure that it will become the No.1 problem in the macroeconomic policy agenda in 2005–2006.

Moldova and the world

The European Commission is ready to release a 15-million-euro grant to Moldova, if Chisinau establishes its relations with the International Monetary Fund, Antonio de Lecea, chairman of the general directorate for economic and financial affairs in the European Commission, has told Moldovan Economics and Trade Minister Valeriu Lazar.

On the other hand, the commercial credits released by the World Bank and the International Monetary Fund (IMF) to Moldova in the mid-1990s must be restructured, while the difference between commercial and preferential interests must be pardoned immediately, so that Moldova hold preferential relations with international financial organizations, independent experts said in the study Economic Policies for Growth, Employment and Poverty Reduction, which was released in Chisinau on Tuesday, June 14.

“The government had paid a high price by allocating funds for reduction of debts, which could be used to encourage the economic growth and poverty reduction,” they noted. Moldova became eligible for preferential crediting only in 1997, after the grave economic crisis. The foreign debts accounted for more than 700 million dollars then.

Also, the experts consider that the government’s tendency to reduce the fiscal burden down to 15 percent is not argued because the lower tax will not “legalize the underground economy.” They pleaded for the maintenance of a 25-percent tax for corporate profits and reintroduction of the rates of 2003.

According to the study, the Moldovan economy registered a seven-percent annual average economic growth the past three years, but it was not a sustainable one because the rise was mainly due to remittances of Moldovan citizens who work abroad.

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