Economic Policies on May 16–31, 2007

Real sector

Industry is falling in continuation…

Industrial enterprises in Moldova made production worth over 7.1 billion lei in January-April 2007 or by 6.4 percent less than in the similar period of 2006. The industry is continuing the decline that began a year ago. The industrial production has dropped in the period concerned because of a 3.2-fold reduction of wine production, 2.5-fold of destilled alcohol drinks, tobacco products decreased by about 24 percent and engineering industry declined by 9.6 percent, etc. The share of wine production in industry has declined more than 3-fold. The production of food and drink enterprises decreased by 24.1 percent in January-April 2007.

At the same time, the agricultural production has grown by 3.1 percent, according to preliminary estimates. The “ascension” of this sector was due to a 3.1-percent advance of livestock sector. On the other hand, consequences of high air temperatures in May, particularly when the summer is ahead, could lead the agriculture to the lowest contribution to GDP in the past years. Representatives of the Ministry of Agriculture and Food Industry have recently confirmed this possibility. The agriculture has suffered a 14-percent decline because of the 2003 drought. The arid climate then has affected most of cereals, vegetables and sugar beet crop.

Foreign sector

Wine exports are among smallest deliveries in past years…

At the same time, the agricultural production was valued at more than 14 million dollars in the 1^st quarter of 2007, or over 5-fold less than in the similar period of 2006. Of course, the restriction of wine exports to Russia and the temporary blocking of deliveries of wines in bulk earlier this year explain this decline. Moldova exported about 585,000 decilitres of bottled wines worth 9 million dollars and 183,000 decilitres of wines in bulk worth 1.4 million dollars in the 1^st quarter of 2007. The exports of bottled wines decreased about 9-fold in the 1^st quarter, compared with the similar period of 2006, while deliveries in bulk dropped approximately 8-fold.

The Moldova-Vin Agency has recently estimated that wine makers intend to produce 13 million decilitres of wines and operate exports worth 150 million dollars this year. Moldova may grow vine on more than 150,000 hectares and may produce at least 600,000 tons of grapes a year, of which it may make wines and other alcohol drinks from about 400,000 tons of grapes. The viticulture covers about 30 percent of Moldova’s economy. Even more, Moldova is the only state in the world which exports at least 90 percent of wines and also the most vulnerable country to eventual external shocks.

Banking

NBM says capitalisation of banks is on the permanent rise…

According to accounts of the National Bank of Moldova (NBM), the supply of bank deposits has increased approximately 38-fold, while the credit portfolio has grown approximately 23-fold in 1995–2007. At the same time, deposits in Moldovan lei have grown 24.3-fold, and credits in lei have increased 14.2-fold. The rise trend of bank deposits has particularly strengthened in 2000–2007, when the supply of deposits has grown 7.6-fold, from 2.04 billion lei up to 15.4 billion lei (1.24 billion dollars) in April 2007. At the same time, credits in economy have increased 6.7-fold, from 2.3 billion lei up to 15.27 billion lei.

Share of medium-term credits has grown…

According to NBM accounts, the gradual rise of terms of deposits in banking has allowed banks to release credits for a longer term than in the past years. So, the share of credits in Moldovan lei released for 6–12 months count for 25.5 percent of the total in 2006, while the share of credits for more than one year has increased up to 56.6 percent, compared with 40.8 percent and 21.3 percent in 2000. The volume of credits in lei and foreign currency released in economy decreased in April 2007 compared with March, though banks have lowered the interest rates, while the supply of deposits continued to grow due to higher interests on deposits. Some commercial banks have increased the interest rates on deposits up to 16–18 percent.

Labour market

Approximately 500 companies owe over 87 million lei for salaries…

At least 488 enterprises owed 87.5 million lei (over 7 million dollars) for salaries last April. The agriculture and processing industry have reported the largest salary arrears. Thus, the agricultural cooperative Tvardiya has salary arrears in the amount of 4.14 million lei, Santek in Taraclia owes nearly 1.3 million lei for wages, Ciumai-Agro — 1.67 million lei, Moldsemporumb — 1.8 million lei, Tracom plant — 690,000 lei. The Labour Inspection issued more than 2,000 petitions last year, of which about 40 percent concerning labour remuneration illegalities, including fiscal evasion.

Salaries on bank cards only…

In this respect, the Government demands all state structures to pay salaries on bank cards only. The massive use of bank cards would annihilate the salary evasions and prevent the double book-keeping. According to informal data, 40–70 percent of salaries are paid by avoiding taxes. More Moldovans use the cards, particularly to withdraw cash and few people use them for cash-free payments. Thus, the value of operations carried out in Moldova with domestic cards rose up to 1.6 billion lei in the 1^st quarter, but cash-free operations count for only 1.7 percent of them.

According to NBM statistics, there are more than 615,000 bank cards (debit, credit, etc.) in Moldova; so more than 15 percent of people hold cards. However, we do not know how representative this figure is because one person could hold several cards. In addition, the market of bank cards is located 80 percent in Chisinau. For comparison, there are more than 7 billion bank cards in Romania; it means approximately 40 percent of population hold cards. If going further, more than 70 percent of people in the Baltic States hold bank cards.

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