Economic Policies on July 16–31, 2009

Real sector

Industry continues to regress…

In the first semester of 2009, the industry sector produced an output worth of approximately 10.63 billion lei (949.11 million US dollars) in current prices. The industrial production volume was 75.1% in comparable prices compared to the period January — June 2008. Therefore, the industry registered a decline of approximately 25%. The decrease of industrial output was influenced by the 41% reduction of production volume of the extraction industry, 27.3% — of the processing industry and 6.1% — of the energy field. This caused the decrease of total production volume by 0.7%, 23.4% and 0.8%, respectively.

The decrease of industrial production volume was caused especially by enterprises in the following sectors: vehicles and equipment production — approx. 52%; footwear manufacture — over 51%; production of devices and medical, precision, optical instruments — 50%; paper and cardboard production — 46.6%; non-ferrous metals products production — over 45%; distilled alcoholic drinks production — approx. 41%; vegetables and fruits processing and preservation — approx. 37%; textile production — 35.6%; wine production — approx. 34% etc.

The statistics show that the decline deepened in the following activities, as compared to May 2009: vegetables and fruits processing and preservation; dairy production; wine production; publishing houses, printing and reproduction of information materials; non-ferrous metals products; production and distribution of thermal-electric power. The enterprises hit by decline of output explain its origin by: difficulties concerning the sale markets, namely the demand reduction from foreign and local companies — consumers of industrial output; scarce raw material; insufficient financial resources etc.

Banking sector

The actions of the National Bank of Moldova aimed to liberalize the credit market…

During a meeting from the half of July 2009, the Administrative Council of the National Bank of Moldova (BNM) decided to reduce the base rate applied to the main monetary policy operations of BNM by 1 p.p. (down to 8%) and to reduce also the interest rate on “overnight” credits and long-term credits by 1 p.p., down to 10.5 and 8%. This seems to be one more signal for the banks to review their credit policy, aiming its liberalization.

In order to increase the volume of liquidity in the banking system, a decision on reducing the norm of obligatory reserves in national and foreign currency by 2 p.p., from 16% to 14% within the calculation basis, saving additional banks’ financial resources — approx. 233 million lei, 11.5 millions US dollars and 12.7 million EURO — for crediting the real sector of the economy. These decisions aim to further maintain on a descendent trend the interest rates on credits and deposits, considering the future increase of the money offer. The possibility to lower the base rate and the norm of obligatory reserves was due to the continuous descendent trend of the inflation registered starting June 2008.

The measures for liberalization of the BNM’s monetary policy have already lowered the interest rate for deposits attracted and credits offered in the banking system. Therefore, the average weighted rate on deposits attracted by the banking system in Moldovan lei evolved from 20.7% (yearly) in January until 15.04% in June (-5.65 p.p.), and the average weighted rate on credits offered by the banking system in Moldovan lei evolved from 23.25% in January to 18.94% in June (-4.31 p.p.).

Public finances

The capital budgetary investments are dramatically falling down…

National Bureau of Statistics (BNS) data show that the amount of fixed investments represented approx. 3.43 billion lei in the first semester of 2009, decreasing by 38% compared to January — June 2008. The activity of foreign investors suffered most severe consequences, right after the public budget. The foreign investments stepped down by 48%, to 614.4 million lei. It seems that foreign investors became more prudent starting with the second half of 2008, when first signals of a negative impact of the global economical crisis on Moldova’s economy were noticed. Besides, economic agents and the population invest less than before. Their fixed investment amounted to 2.12 million lei in the first semester of 2009, lesser by approx. 29% compared to January — June 2008.

Rumors say that the Government levied a distraint on the budget investment expenses, while the budget deficit could exceed 2 billion lei, and the population and firms, including the foreign ones, have less available money. The structure of the fixed capital investments by forms of ownership consists of: 24% — by public economic agents with public ownership, 75.6% — by private economic agents, who have fulfilled approx. 76% of the total volume of construction — assembly works and 98.4% of dwellings brought into use.

Labour market

Increase in wages, just nominal…

According to the statistics, the average monthly wage in economy was approx. 2674 lei (238 US dollars) in the first semester of 2009 and increased by 10% as compared to the similar period of 2008. Therewith, the real wage in the same time period increased by approx. 9%. The average wage in the public sector was 2345 lei (209 US dollars) and increased by 18 % compared to the same period of 2008, in the real sector of economy — 2865 lei (256 US dollars) and increased by over 7% compared to the similar period of the last year.

In June, the average salary of an employee was 2844.5 lei. The average monthly wage rose by 3.4% and the real wage — by 4.2% compared to June 2008. In the real sector, the average monthly salary was 2970 lei (265 US dollars) and increased by approx. 6% compared to the similar period of 2008. In the budgetary sector, the average wage was 2627 lei (234 US dollars), namely 99.4% of last year’s level, therefore registering a decrease.

The public administration employees received, in the first semester of 2009, an average monthly salary of 3150 lei (281 US dollars), by 20% more than in the similar period of 2008. The official statistics shows that this is one of the biggest wage increases. According to the National Bureau of Statistics, only the employees from the health and social assistance sectors (21%, 2590 lei) and the employees from the entertainment, cultural and sports activities (21%, 2000 lei) received bigger increases.

The slowest wage increase was registered in the finance sector, by 3.8% more in a half of year. Even so, the bankers receive the biggest revenues — an average of 5600 lei per month. The smallest wages are traditionally being paid in the agriculture, hunting economy and sylvan culture. This is by the way the sector with the most employees. They received an average wage of 1290 lei (115 US dollars) or by 10% more than in January — June 2008. However, the constructors had to face the most important wage decrease — the wages have decreased by more than 10% in a half of year, to a monthly average of 2950 lei (265 US dollars), and the salary within the extraction industry diminished to 3160 lei (282 US dollars).

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