Economic Policies on May 16–31, 2011

Banking sector

Non-performing credits of banks continue to decline…

According to NBM data, the share of disadvantageous credits in overall loans on banking system of Moldova was 10.55 percent, which is by about 7 percent less than in the similar period of last year. The non-performing credits doubled in 2009, up to 16.4 percent on system and continued to increase up to 17.4 percent in the first half of 2010. Their share decreased in the second semester, down to 13.33 percent in late 2010. Bank representatives described the stabilisation of the non-performing credit portfolio as the most important accomplishment of the system in 2010. However, they fear that Moldova will need a couple of years to make the non-performing credit portfolio go down to the level registered before the economic crisis. According to experts from the Association of Moldovan Banks, the share of disadvantageous credits in overall loans is maximum 5.5 percent in European countries. Consumer and mortgage credits are an important source of disadvantageous loans. As for May 1, 2011, consumer credits count for more than 8 percent of overall loans, while credits for real estate, construction and development count for 11.8 percent.

Public funds

Fiscal policy revolution for 2012…

Preliminary objectives of the fiscal policy of MTSF (Medium-Term Spending Framework) for 2012–2014 worked out by the Ministry of Finance stipulate the reintroduction of the 12-percent income tax for businesses in 2012. As well, all general and individual fiscal facilities, including the zero tax for reinvested profit will be cancelled. Even more, the Ministry of Finance has plans to introduce an 18-percent income tax for banks in 2012. As well, the goals seek the modification and unification of the income tax regime for professional activities of notaries, lawyers, legal executors, mediators. Professionals who practice entrepreneurial activities such as taxi transportation, washing, bars, hairdressing, sale of flowers, vending devices, will pay a simplified income tax. The income held under the shape of dividends is expected to decrease from 15 percent down to 6 percent and a final holding mechanism for this tax will be introduced. Starting 2012, the income tax for non-residents will be lowered from 15 down to 12 percent, at the same extent as the income tax for economic agents, except for the income under the shape of dividends (6 percent).

Home building and mortgage market

There are many but expensive apartments…

Official statics reveal that building developers inaugurated 627 apartments covering 73,300 square metres overall in the 1^st quarter of 2011 on account of all funding sources, which was about 159 percent compared with the similar period of 2010. The apartments were built by private businesses, counting for 100 percent of all inaugurated residential buildings. As many as 361 private homes covering 57,300 square metres were inaugurated in January-March 2011 on account of own means of population, which is over 75 percent of all residences inaugurated on country, and by 73 percent more than in January-March 2010. The distribution on residential areas shows that 498 apartments covering 56,400 square metres overall or about 74 percent of all residences and 150.8 percent compared with January-March 2010 were inaugurated in urban areas. The share of residences inaugurated in urban areas decreased by nearly 4 percent, compared with January-March 2010.

Apartments inaugurated in January-March 2011 on development regions

	Inauguration
	Of apartments, units	Overall surface
		Thousand square metres	in % compared with:		January-March 2010 in % compared with:
		Thousand square metres	January-March 2010	total	January-March 2009	total
Total	627	76,3	158,6	100,0	62,5	100,0
Of which:
Chisinau municipality	452	56,7	179,4	74,3	68,7	65,7
North	67	7,3	76,0	9,5	56,5	20,0
Centre	74	8,2	2.8 fold	10,7	34,2	6,0
South	24	3,1	182,4	4,1	59,7	3,5
ATU Gagauzia	10	1,1	47,8	1,4	88,9	4,8

Source: www.statistica.md

The regional distribution reveals that most of apartments were built in Chisinau municipality, where 452 apartments covering 56,700 square metres overall (more than 74 percent of all residences inaugurated on country) were inaugurated, by over 79 percent more than in the similar period of the precedent year.

Republic of Moldova is one of most expensive countries in terms of mortgage credits…

According to a ratingRO worked out by the Russian Real Estate Agency Penny Lane Realty, Moldova is part of the most expensive countries in terms of mortgage credits, being ranked the 50^th place among 60 countries. The average rate on mortgage credits in Moldova is 13.2 percent and the monthly payment is 1,184 euros, the supplementary amount accordingly to the interest rate is 161,936 euros, and the total cost of credit is 284,186 euros (232 percent). According to the rating, Denmark provides the cheapest mortgage credits, with an average rate of 1.36 percent, a monthly payment of 566 euros, a supplementary amount of 16,684 euros, and a cost of 138,935 euros (114 percent). Switzerland provides credits for an average rate of 2.23 percent, a monthly payment of 596 euros, an additional amount of 20,733 euros and a cost of 142,983 euros (117 percent). Spain was ranked the 3^rd place, as the average rate on mortgage credits there is 2.44 percent, the monthly payment is 628 euros, additional amount worth 28,584 euros and a cost of 150,834 euros (123 percent). Turkmen, Argentina and Azerbaijan provide the most expensive credits with an average rate of 16–18 percent, a monthly payment of 1,373–1,429 euros, an additional amount of over 200,000 euros, and a cost of up to 281 percent. The Penny Lane Realty took into account the average rate on mortgage credits, taxes and fees for credit service.

Labour market

Unemployment rate is on the rise despite some increasing indicators…

Same official statistics show that Moldova had 1,137,700 economically active people (employed population and jobseekers) in the 1^st quarter of 2011, by 1.2 percent (13,000 people) more than in the 1^st quarter of 2010. The structure of active population has changed as follows: the share of employed population decreased from 90.9 percent down to 90.6 percent and the share of jobseekers increased from 9.1 percent up to 9.4 percent. No important disparities on genders and areas were observed for economically active people: the share of men (51 percent) exceeded the share of women (49 percent), and the share of economically active population in rural areas was lower than in urban areas (48.4 percent and 51.6 percent respectively).

The employment rate for population aged 15 years old and over (the share of active population of 15 years old and over in the total population of 15 years old and over) was 38.2 percent, and increased compared with the 1^st quarter of the precedent year (37.9 percent). This indicator was higher for male population — 41.3 percent — than for female population — 35.5 percent. Following was the employment rate on areas: 46.6 percent in urban areas and 32.1 percent in rural areas. This indicator was 28.5 percent in the age category of 15–29 years old, and 42.7 percent in the age category of 15–64 years old (labour age in the European Union accordingly to Eurostat methodology), increasing by 0.2 percent.

The employment rate for population of labour age (16–56 years for women and 16–61years for men) was 45.3 percent. The employed population count for 1,030,500 people and increased by 0.8 percent, compared with the 1^st quarter of 2010. The employment rate for people aged 15 years old and over (the rate of employees aged 15 years old and over compared with the total population in this age category) was 34.6 percent, and increased by 0.2 percent compared with the 1^st quarter of 2010. The share of men was higher (36.4 percent) compared with the rate of women — 33.0 percent. The occupation rate on residential areas was 41.9 percent in urban areas and 29.3 percent in rural areas.

The employment rate for population of labour age (16–56/61 years) was 40.8 percent, of population aged 15–64 years old was 38.6 percent, and of people aged 15–29 years old was 23.8 percent. The distribution on activities in national economy reveals that 211,200 people (20.5 percent of employed people) worked in agriculture. The number of employees in agriculture has increased by 12,400 people or 5.6 percent, compared with the 1^st quarter of 2010. As many as 819,400 people worked in non-agricultural sectors, which is by 20,300 people or 2.5 percent more than in the 1^st quarter of 2010. The share of employees in industry was 14.3 percent (14.2 percent in 2010) and 4.2 percent (5.0 percent in 2010) in building sector. The number of employees in industry increased by 1 percent, while of those working in building sector decreased by 14.1 percent, compared with the precedent year. Sixty-one percent of all employed people worked in service sector, by 2.1 percent more than in the 1^st quarter of 2010, while the absolute number of employees in service sector increased by 26,000 persons. The informal sector count for 10.3 percent of all employees in economy, and 24.4 percent had informal jobs. Salary-earners count for 27.7 percent of all informal employees, and 8.8 percent of all salary-earners had informal jobs.

Underemployed people (who had jobs but worked less than 40 hours a week, but wanted and were ready to work more) count for 95,400 people, or 9.3 percent of all employed persons (this is the unemployment rate). This category increased by about 10 percent, compared with the 1^st quarter of 2010. The unemployment hit more men — 64.3 percent — in the total number of jobseekers, and people from rural areas — 54.7 percent. The national unemployment rate (the rate of jobseekers in active population) was 9.4 percent and increased compared with the 1^st quarter of 2010 (9.1 percent). The unemployment rate for men and women was the following: 11.9 percent and 6.9 percent. Important disparities were observed between the unemployment rate in urban areas — 10 percent, and rural areas — 8.8 percent. The unemployment rate among young people (15–24 years old) was 19.2 percent. This indicator in the age category of 15–29 years old was 16.5 percent.

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