Economic Policies on January 1–17, 2010

Inflation and prices

Moldova reports lowest inflation rate in the region for 2009…

Moldova recorded an inflation rate of 0.9 percent in December 2009, compared with November. Foodstuff prices increased by 1.7 percent in December 2009 and prices of manufactured goods and tariffs for public services rose by 0.5 percent each. Given the deflation of 0.9 percent for 11 months of 2009 and inflation rate of 0.9 percent for December 2009, the data of the National Bureau of Statistics say that Moldova recorded an inflation rate of 0.4 percent in 2009, the lowest level in the region.

Foodstuffs prices decreased by about 4 percent on average in 2009, while prices of manufactured goods increased by 2.5 percent and tariffs for public services by more than 2 percent. To note that Moldova reported an inflation rate of 7.3 percent for 2008 and the Government forecasts a 5-percent inflation rate for 2010. However, latest price rises, of energy agents (natural gas, electricity, heating etc.) in particular, as well as the rise of some fiscal policy taxes which will be part of the final production cost (inclusively of imports) will fuel prices and inflation respectively.

In fact, the inflation will be most monitored and enounced indicator in 2010. The conduct of other macroeconomic indicators with a strong impact on population and economic agents will depend on inflation. So far, it seems that the annual inflation rate will not exceed the 5-percent limit foreseen by the draft budget law for 2010, but it could exceed this target, given the potential price rise declared by authorities as well. The inflation will keep being the indicator with the strongest impact on economy for sure.

Remittances

Their evolution could follow another, ascending trend…

According to an express analysis by Valeriu ProhnitchiRO from Expert-Grup (EG) regarding the evolution of remittances (decline in this case) for 11 months of 2009 based on data of the National Bank of Moldova (NBM), the decline in remittances should not trouble, as this evolution reveals the seasonal nature of this indicator. According to NBM, overall remittances by individuals accounted for 102.2 million US dollars in November, compared with 111.5 million US dollars in October. However, the fall should not raise concern, as this evolution is linked to the seasonal nature of this indicator. In all likelihood, remittances increased again in December 2009, according to EG (they are estimated at 130–135 million US dollars). Accounts for November 2009 (and EG estimate for December) concerning remittances reveal that the negative trend of remittances in January-August 2009 has reversed and it is recovering now.

Finally, these accounts reveal a stabilisation or even an economic growth in areas employing Moldovan emigrants (less in Russia, given the falling share of Russian rouble in overall remittances). There is a decisive economic recovery for the time being, but correlating the evolution of remittances by migrant workers with evolution of exports, domestic trade and public services in November one may note that Moldova is succeeding an economic stabilisation, according to the EG analysis.

Table 1.Evolution of remittances (January-November 2009), million US dollars

Source: Graphical representation by ADEP, based on NBM data

Foreign trade

Both exports and imports are on the decline…

The National Bureau of Statistics reported overall exports worth about 1.16 billion US dollars for January-November 2009, which is by over 21 percent less than in the similar period of last year. Commodity exports to the EU-27 bloc turned over 605 million US dollars (by over 20 percent less than in January-November 2008), covering 52.2 percent of overall supplies (51.6 percent in January-November 2008).

CIS member states attracted 38.2 percent of Moldovan exports (38.8 percent in January-November 2008), which equal to about 443 million US dollars. Commodity exports to CIS dropped by 22.5 percent, compared with January-November 2008. An analysis of exports on countries reveals that the decline in supplies to Romania (by about 30 percent), Ukraine (by 46.1 percent), Russian Federation (by 11.2 percent), Italy (by 19.4 percent), Poland (by 41.7 percent), Kazakhstan (by 40.6 percent), Switzerland (by 41.7 percent), and Belarus (by 13.6 percent) reduced the overall exports by more than 19 percent.

At the same time, imports turned over 2.91 billion US dollars in January-November 2009, which is by 35 percent less than in the similar period of 2008. Imports from EU-27 turned over 1,274 billion US dollars (by about 35 percent less than in January-November 2008), covering 43.7 percent of overall imports (43.6 percent in January-November 2008). Imports from CIS exceeded one billion US dollars (by more than 35 percent less than in January-November 2008), which is equivalent to 34.6 percent of overall imports (34.9 percent in January-November 2008). The trade balance deficit was 1,757 billion US dollars and the import/export coverage level was about 40 percent in the examined period, compared with about 33 percent in January-November 2008.

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