Economic Policies on July 1–15, 2009

Inflation and prices

Prices still going “down”…

Official statistics show that the Consumer Price Index (CPI) in June 2009, compared with May 2009, was 99.7 percent, and 99.2 percent compared with June 2008 (it was 98.9 percent compared with June 2008 and 115.6 percent compared with June 2007). Thus, a deflation was recorded in June 2009, a rate of 0.3 percent, too. Prices have decreased by 1.8 percent this year. The decline of average consumer prices by 0.3 percent was linked to the decrease of prices for food products by 1.8 percent and rise of prices of manufactured goods by 0.5 percent and tariffs of public services by 0.2 percent.

Prices of almost all fruit and vegetables have decreased in the given period, compared with May 2009. At the same time, prices of manufactured goods have increased in the period concerned; in particular, prices of fuels rose by about 9 percent, drugs by 1.6 percent, building materials by 0.3 percent, etc. As well, prices of confections, footwear, furniture, books and others have decreased by approximately 1.0 percent. Tariffs of public services rose as follows in June 2009: drinking and household water providing services increased by more than 3 percent, housekeeping tariffs by 0.7 percent. Prices of majority of products and services were at the level of May 2009.

External trade

Value of trade exchanges are below 2007 level…

Moldova’s exports dropped by about 22 percent in the first five months of 2009, and imports decreased by over 34 percent, compared with the similar period of 2008. According to the National Bureau of Statistics, Moldovan exported goods worth 473 million dollars and imported goods worth 1,238 billion dollars in January-May 2009. The trade balance deficit accounted for about 765 million dollars in the given period and decreased by more than 40 percent, compared with January-May 2008.

Exports of goods to the European Union (EU-27) exceeded 54 percent (about 257 million dollars) and supplies to the CIS area turned over almost 36 percent (about 169 million dollars). At the same time, exports to EU dropped by about 18 percent and supplies to CIS by 30 percent in the given period, compared with January-May 2008.

Romania keeps being the No.1 external market for the products made in Moldova, and the neighbouring country still heads the top of Moldova’s export partners, attracting more than 20 percent (more than 95 million dollars) out of overall exports. Russia ranks the 2^nd place with 19 percent out of overall exports (more than 91 million dollars), followed by Italy — about 11 percent (over 50 million dollars), Belarus 7.1 percent (33.6 million dollars), Germany 6.1 percent (29 million dollars), Ukraine 5.4 percent (25.6 million dollars), etc.

As for imports, Kazakhstan ranks the 1^st place, as Moldova imported goods (especially natural gas) worth 166 million dollars or 11-fold more than in the similar period of 2008. Following Kazakhstan is Ukraine with 12.5 percent (more than 154 million dollars), Russia 9.7 percent (120.5 million dollars), Romania 8.2 percent (102 million dollars), and Germany 7.2 percent (89 million dollars), China 7 percent (86.3 million dollars).

Decline in trade in Transnistrian region is worse…

On the other hand, exports operated by Transnistria-based enterprises formally certified in Chisinau are seriously falling every month: they decreased by 65 percent in half a year, after a fall of 60 percent in five months. According to data of the Ministry of Reintegration, the export from the Transnistrian region declared to the Customs Service of Moldova was worth about 154 million dollars in the first half of this year, which is only half of the supplies recorded in the similar period of 2005, a year given by the Transnistrian administration as one of the best for economy.

Exports of all categories of goods have fallen, except for electricity and agricultural production. The metallurgical exports suffered the deepest decline of 79.2 percent in half a year, followed by supplies of the engineering and electro-technical industry with 66 percent, spirits 50 percent, goods manufactured by light industry -21.5 percent.

Exports to the European Union count for 57.3 percent of the overall supplies in six months, while CIS member states attracted only 26.2 percent of the overall supplies. At the same time, imports from the Transnistrian region declared to the Customs Service accounted for 39.1 million dollars and dropped by 42 percent, compared with the similar period of 2008. The European Union is leader regarding goods imports (82.5 percent). As of July 1, 2009, 559 Transnistria-based economic agents were registered with the State Chamber of Registration, including 373 with provisory certification and 186 businesses with permanent certification.

International macroeconomics

FMI darkens growth prospects for Central and Eastern Europe…

IMF estimates that Central and Eastern Europe will experience a serious recession this yearRO, with economies from the region being expected to keep facing strong contractions, but 2010 is expected to improve the economic environment in Eastern Europe. IMF updated the economic contraction estimates for Central and Eastern Europe for 2009, anticipating now a 5-percent decline, compared with the previous forecast of 3.7 percent from April. In particular, the Fund forecasts a 1-percent growth of the Gross Domestic Product for 2010, which is by 0.2 percent more than the April estimates, according to a recent world economic report released by the international organisation.

FMI lends a hand to Central and Eastern Europe…

Central and Eastern European countries have called on loans of IMF, World Bank and European Union, trying to overcome national difficulties induced by the world crisis and deepened by a true recessing spiral. Hungary was the first EU member to call on IMF, EU and WB assistance, getting an overall financial assistance worth 20 billion Euros last autumn. As well, Romania has a stand-by accord worth 12.95 billion Euros with IMF for a two-year term, and another 7 billion Euros will come from EU, WB and European Bank for Reconstruction and Development. Poland called on a flexible funding line worth 20 billion dollars (14.3 billion Euros) from IMF, which is unlike those provided to Romania and Hungary due to fewer IMF restrictions.

Bulgaria is one of few countries in the region which did not seek international financial support, but the election of a new government in Sofia could change the situation, with its members stressing more than once the necessity of such an agreement for the poorest EU member.

EU will keep facing decline in 2010, too…

IMF has worsened the 2009 forecasts for the EU economy, too, announcing a 4.7-percent economic decline, compared with the 4-percent forecast from April. At the same time, the EU economy will contract by 0.1 percent next year, by 0.2 percent less than estimated by IMF three months ago. As regards the economic evolution of the Eurozone, IMF expects a 4.8-percent economic contraction in 2009, while 2010 will bring a decline of 0.3 percent. The indicators calculated accordingly to surveys on evolution of consumption and business environment are on the rise, but reports on real economic activity indicate poor redressing signals, according to the IMF report.

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