Economic Policies on March 19 – April 1, 2007

Financial-banking system

Assets of Moldovan banking reach 2 billion dollars…

According to data of the central bank, the total assets of the domestic system rose by 5.32 percent in January-February 2007, up to about 23.990 billion lei (1.91 billion dollars). The assets of commercial banks rose due to the growth of big and medium-size banks. It was based in turn on growth of foreign investments in the capital of Moldovan banks. Thus, the share of foreign investments in the capital of Moldovan banks rose by 1.18 percentage points in January-February 2007, up to nearly 64 percent and by 13.8 percent compared with the same period of 2006.

At the same time, the credit portfolio of commercial banks rose by 2.3 percent this year, up to 14.14 billion lei, while the balance of deposits grew by 4.7 percent, up to 18.05 billion lei. In comparison with the similar period of 2006, they have grown by over 38 percent and 31 percent, mainly due to capitalisation of banks. Total assets of the banking rose by about 27 percent on account of foreign investment inflows. The assets rose most in the last quarter of the year, notably by 1.8 billion lei, compared with nearly 3 billion lei in the 1st-3rd quarter of 2006.

…and they are comparable with assets of a medium-sized Czech bank

BCR Chisinau, which became meantime the daughter bank of the Austrian giant Erste Bank, has achieved the most spectacular growth of assets, notably by 178 percent. EximBank, purchased by Italy’s Gruppo Veneto Banca, ranked the 2nd place after registering a 55-percent rise of assets, followed by Mobiasbanca — 38.1 percent and Moldindconbank — 31.8 percent^[1].

Share of insurance market in GDP grows, but below level of developing states…

At the same time, the share of Moldovan insurance services in GDP reached 1.43 percent in 2006 and rose compared with 2005, when it was 1.1 percent. However, it is lower than the level of developing states, not to mention the developed countries. In particular, insurance services in transition countries cover up to 3 percent of GDP, compared with about 6 percent of GDP in majority of developed states. The enforcement of the new law on insurance that the Parliament has recently re-voted will strengthen the insurance market. According to estimates, about 22–25 insurance companies could continue operating on market, compared with 32 in 2006.

Currency

Moldovans working abroad transfer more money to their country…

Currency transfers via formal channels accounted for about 855 million dollars in 2006, which is by 25 percent more than in 2005. Moldovan banks perform money transfers via the rapid systems Western Union, Unistream, SWIFT, Strada Italia, Trabex (Spain), Turciye Express (Turkey), Lider (former Vip Money Transfer), Rus Express (Russian Federation), Strada Italia, Banco Espirito Santo (Portugal). Moldova was ranked the 1st place in the World Bank’s standing, with migrants’ remittances covering nearly 20 percent of GDP, according to the report “Migration and Remittances: East Europe and the former Soviet Union.” Moldova is one of biggest countries in the world in terms of emigration, World Bank experts estimated. Considerable remittances to Moldova facilitated the reduction of poverty of households and offered an essential exchange.

Besides all positive effects of migration correlated with remittances, constant remittances make the families who depend on emigrants are becoming more inert in seeking jobs or building individual business. The reduction of labour force inside the country is also a negative effect of emigration on domestic labour market. The reduction of labour force offer has also compromised some percentage points of the growth achieved in 2000–2005. Even more, the degradation of quality of human capital cannot be neglected. All these drawbacks must urgently find a place in Government’s agenda.

Share of total foreign debt in GDP is about 83 percent…

Moldova’s foreign debt has grown by about 757 million dollars (some 44 percent) in the past six years, up to 2,482 million dollars at the end of 2006. It covered about 83 percent of the GDP of 2006 (approximately 3 billion dollars). The total foreign debt, which includes the debts of governmental and private sectors, has annually grown by 10 percent on average, except for years 2001 and 2004, when it declined by more than 44 million dollars and, respectively, 39 million dollars, compared with the precedent years. The foreign debt rose more in 2006, notably by 402 million dollars (more than percent 19 percent), compared with 2005.

According to the National Bank of Moldova, the debt of the governmental sector dropped by nearly 100 million dollars (12 percent) in late 2006, compared with early 2001, down to 718.6 million dollars. At the same time, the governmental debt rose by more than 9 percent (60.6 million dollars), compared with 2005. The share of the governmental debt in the total foreign debt was around 30 percent.

…while deficit of current account is among highest in the region as share in GDP

At the same time, the deficit of current account of Moldova’s balance of payments rose by more than 65 percent in 2006, up to approximately 399 million dollars, holding over 13 percent of GDP (relatively high). According to preliminary data, the deficit of trade balance (which is the main component of the balance of payments) with goods and service accounted for about 1,597 million dollars.

↑ http://www.e-democracy.md/e-journal/20061215/#2

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