Economic Policies on October 16–31, 2006

Inflation and prices

Prices not declining…

The inflation rate for January-September 2006 could exceed the 10% target forecasted by Government for this year. Although we still had low prices of agricultural products in October, they rose in general. In particular, prices of tomatoes, potatoes, sugar, dairy, etc. have grown. Tariffs of communal services did not change for the time being. But they could be revised in November and consumers could receive other invoices for maintenance than those expected.

Real sector

Industrial production dropped by 7% in January-September 2006…

All industrial enterprises in Moldova made production worth about 14.96 billion lei (about 900 million euros) in January-September 2006 or 93% compared with the same period of 2005 or by 7% less than in the same period of 2005. The reduction of industrial production was linked to decline of production volume of enterprises making wines, distilled alcohol drinks, cigarettes, glass and glass items, oils and fats, paper and cardboard, machines and equipment. The production volume of enterprises working in food and drink industry dropped by 21% in general.

Financial-bank sector

Deposits in banking system accounted for about 1 billion dollars…

The total deposits in banking system in Moldova amounted to about 13.08 billion lei (about 1 billion dollars) in early September, given the fact that total assets in the system are estimated at over 20 billion lei (1.5 billion dollars). The rise was due to higher interests on deposits in lei and foreign currency introduced by commercial banks. The average rate on deposits in lei rose by 0.63 percentage points in September, up to 12.62 percent on average, while on deposits in foreign currency grew by 0.04 percentage points, up to 5.26 percent.

Crediting rose in spite of higher interests…

The supply of credits rose by 2.9% in September, up to about 12.32 billion lei (930 million dollars) at the end of the month. The rise came in spite of higher interest rates on loans in lei and foreign currency. The average interest rate on credits in lei rose by 0.32 percentage points in September, up to 18.61%, while on credits in foreign currency grew by 0.08 percentage points, up to 11%. Loans released to private enterprises have grown by 1.7%, while those given to individuals have risen by 4.6%. At the same time, the supply of credits for state enterprises and other organisations that practice financial operations has declined by 0.3% and 2.2%.

Foreign trade

We have few competitive products for exportation…

The production and range of products have visibly declined in Moldova. Researches reveal that Moldova produced about 700 groups of goods in the 1990s, while the production sector is concentrated on three groups of products at present: spirits, textiles and kernel and sunflower. Probably this is a reason why the GSP Plus system is used 60% only. According to authorities, the European Union is ready to start drafting the package of documents needed to award the autonomous trade preferences to Moldova. Two assessment missions of the EU will inspect potential exporting enterprises in Moldova by the end of this year and in early 2007.

Trade deficit problem…

The trade deficit could grow the next two years due to larger imports for investments and consumption, while the process of stabilisation of trade balance will begin in 2009 only. The reasons of a faster acceleration of imports than of exports include the rise of foreign investments (because they involve the importation of equipment, technologies, raw materials or parts) in Moldova and the growth of demand for consumption, which cannot be covered by domestic production.

Labour market

Medium salary on economy will account for about 121 euros in 2007…

The Government has recently approved the limit of medium monthly salary on economy for 2007, which is expected to account for 2,015 lei (about 121 euros). However, this is rather an estimated level adopted to calculate individual welfare contributions for next year. The new level is by 18.5 percent higher than the medium monthly salary forecasted for 2006. The proposed limit of medium salary includes rises of salaries of budgetary workers after implementation of stages of the new pay system and implementation of the salary policy foreseen for the real sector of economy within the medium-term expense framework for 2007–2009.

Jobs are most important for youths…

At the same time, a research by the National Bureau for Statistics reveals that the creation of new jobs and better pay conditions are the most important measures capable to improve the situation of youths on labour market in republic. This is actually the opinion of youths, a relevant opinion in the research titled “Youths on Labour Market”. The study demonstrates that most of youths — 94 percent — consider that jobs are important for them.

Persons with gymnasium diplomas are most mobile in seeking jobs…

It is interesting that only 4.9% of respondents have ever called on the National Employment Agency (ANOFM). More than half of these persons have called on agency after graduation. About 56% out of the total number of persons who called on ANOFM were from villages. As regards the education level, holders of gymnasium diplomas held the highest share (37%). It was established after a rating of economic activities that 28% of employed youths work in agriculture, 20% in trade, hotels and restaurants and 15.4% in industry.

The assignment on basis of education level outlined the fact that holders of gymnasium diplomas were most inclined to change their jobs, followed by graduates from secondary, high and professional schools. Two thirds of youths have changed their jobs because of low salaries, while each 5th person was willing another job.

State raises double benefit from Moldovans working abroad…

At the same time, data of the National Bank of Moldova show that Moldovans working abroad sent home about 530 million dollars via official channels in eight months of this year. IMF experts found out that 53% of the currency is sent to Moldova on formal ways and another 47% on informal ways, inclusively by occasional transportation or messengers. Thus, the IMF estimates transfers worth 1.1–1.2 billion dollars.

According to some estimates, 20% of Moldovans earn their living outside. They sent hundreds of millions of euros to Moldova last year, avoiding thus the economic collapse. According to international statistics on migration, migrant workers sent 165 billion dollars to their families at world level in 2005 and an amount larger than 200 billion dollars is estimated in 2006.

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