country report by the economist magazine: moldova february 2011

Country Report

Moldova

February 2011

Economist Intelligence Unit 26 Red Lion Square London WC1R 4HQ United Kingdom

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Moldova 1

Country Report February 2011 www.eiu.com © The Economist Intelligence Unit Limited 2011

Moldova

Executive summary 3 Highlights

Outlook for 2011-12 4 Political outlook 6 Economic policy outlook 6 Economic forecast

Monthly review: February 2011 9 The political scene 10 Economic policy 12 Economic performance

Data and charts 17 Annual data and forecast 18 Quarterly data 19 Monthly data 21 Annual trends charts 22 Monthly trends charts 23 Comparative economic indicators

Country snapshot 24 Basic data 25 Political structure

Editors: Ann-Louise Hagger (editor); Joan Hoey (consulting editor)

Editorial closing date: January 19th 2011

All queries: Tel: (44.20) 7576 8000 E-mail: [email protected] Next report: To request the latest schedule, e-mail [email protected]

2 Moldova


RUSSIA

FINLAND

ESTONIA

BELARUS

LITHUANIA

LATVIA

POLAND

MOLDMOLDOVAOVA

CHCHISINAUISINAUCHISINAU

ROMANIA

UKRAINE

MOLDOVA

Black Sea

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© The Economist Intelligence Unit Limited 2011

Main railway

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Transdniestr region

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Moldova 3


Executive summary

Highlights

February 2011

• There will be broad political and policymaking continuity under the Alliance for European Integration (AEI) coalition government that was reconstituted in January 2011 following an election in November 2010.

• Uncertainty will remain in the short term over the issue of the election of the president, but the Economist Intelligence Unit sees a good chance that the repeat election cycle will be broken this time.

• With the effect on social stability of economic downturns tending to occur with a lag, there is some risk of social unrest.

• A settlement with Transdniestr is unlikely to be achieved in 2011-12.

• Economic policy will be guided by the IMF agreement. The budget deficit will shrink, but remain large, at an annual average of 3.7% of GDP in 2011-12.

• We expect a continuing recovery over the forecast period, with real GDP growth picking up to 4.3% in 2012 from 4% in 2011.

• Demand-pull inflationary pressures will be subdued, and the adjustment of gas import prices to European prices should be completed in 2011, allowing inflation to moderate to 5.6% by end-2012.

• The current-account deficit is forecast to remain large in 2011-12, albeit smaller than in the pre-crisis period, at an average of around 11% of GDP.

• The new AEI government's political programme is little changed from its predecessor's. The EU has welcomed the new government, and expressed its support for continuing progress on European integration.

• At the end of November 2010 the national budget deficit totalled Lei2.02bn (US$163m), a year-on-year contraction of 34%.

• In January the National Bank of Moldova (NBM, the central bank) raised its key interest rates by 1 percentage point, taking the base rate to 8%. The NBM cited higher energy prices and rising domestic demand for the move.

• Real GDP growth accelerated to 8% year on year in the third quarter of 2010 from 6.4% in the second quarter. Growth was supported by rising private consumption and investment spending.

• Year-on-year consumer price inflation ticked up to 8.1% in December 2010 from 7.7% in November, driven by higher food and oil prices.

• The current-account deficit grew to US$118m in the third quarter of 2010 from US$76m a year earlier as recovering domestic demand and higher energy prices widened the trade in goods deficit.

Outlook for 2011-12

Monthly review

4 Moldova


Outlook for 2011-12 Political outlook

Following the early parliamentary election in November 2010, a reconstituted Alliance for European Integration (AEI) coalition government has been formed, meaning that there will be broad political and policymaking continuity. Vlad Filat will continue as prime minister, and the new cabinet is little changed from the previous one. Nevertheless, although political uncertainty has declined significantly, some uncertainty will remain in the coming months, owing to the still-unresolved issue of the election of the president. In addition, although the new AEI coalition is expected to hold together, it is likely to remain subject to the internal tensions that characterised the previous government. Relations with the opposition Party of Communists of the Republic of Moldova (PCRM) are likely to remain polarised.

The new AEI coalition comprises the three largest parties in the previous coalition: Mr Filat's Liberal Democratic Party (LDP; 32 seats in the 101-seat parliament), the Democratic Party (DP; 15 seats) and the Liberal Party (LP; 12). The fourth party, the Our Moldova Alliance (OMA), did not win any parliamentary seats this time. The election did not materially alter the balance of parliamentary forces. Neither the reconstituted AEI coalition nor a possible coalition between the DP and the PCRM (which won 42 seats) would hold the three-fifths of seats in parliament needed to vote in a new president under the current system.

The election in November was the third parliamentary election in Moldova in less than two years, because parliament failed to elect a new president after parliamentary elections in April and July 2009, throwing the country into a prolonged period of political uncertainty. After the election in July 2009, the four AEI parties, like the PCRM in April 2009, did not win sufficient parliamentary seats to choose the next president on their own, and the opposition boycotted the presidential vote. According to the constitution, another parliamentary election must be held if parliament fails to elect a president. In order to avoid the constitutional deadlock that followed the previous two parliamentary elections, the AEI held a constitutional referendum in September 2010 on its proposal to change the election of the president to a direct vote. Following this, the AEI intended to hold presidential and parliamentary elections together in late 2010. However, the referendum failed, leading to another parliamentary election on November 28th.

The political outlook is set to remain uncertain in the short term, probably until mid-2011. This is especially the case in the light of the strong polarisation of domestic politics since the election in April 2009. The then opposition parties were aggrieved at what they saw as voting fraud by the ruling PCRM. Protests at the result turned violent and met a heavy-handed police response. Politics have remained deeply divisive since then. Nevertheless, there appears to be a better chance than before that a way will be found to elect a new president

Political stability Political stability

Moldova 5


following the parliamentary election in November, thus breaking the repeat election cycle.

There has been no further social unrest since the outbreak in April 2009, and the latest election passed off peacefully. Nevertheless, some risk of social unrest will remain, in the light of the political polarisation and uncertainty. Moreover, the sometimes negative effect on social stability of economic downturns tends to occur with a lag, and the government is implementing painful economic measures.

Now that the new government is in place, attention will turn to electing a president. In the light of the risk that the PCRM would boycott a vote in parliament on the AEI's presidential candidate�the DP leader, Marian Lupu�an attempt could be made to approve legislation in parliament on changing the way in which the president is elected (for example, by reducing the number of seats needed in successive parliamentary votes from 61 to 57 and then to 52, as proposed by the PCRM). Alternatively, the issue could again be put to a national referendum.

The so-called 5+2 format of settlement negotiations concerning Moldova's separatist region of Transdniestr involves the US and the EU, along with Russia, Ukraine, the Organisation for Security and Co-operation in Europe (OSCE), Moldova, and Transdniestr. However, progress has been blocked by Russia and Transdniestr since early 2006. A breakthrough on Transdniestr remains unlikely during the forecast period. Equally, it is unlikely that violence will flare up, not least as Moldova lacks the military capability to seek to recover the separatist territory by force.

The Economist Intelligence Unit envisages further progress on European integration under the AEI. Talks on a new agreement with the EU were launched in January 2010, after Moldova satisfied the EU's conditions over the conduct of the election in July 2009 and following an improvement in relations with Romania, an EU member. Moldova hopes to negotiate an Association Agreement, offering expanded trade preferences and a visa-free regime, to go beyond the current Action Plan, which was extended following its expiry in February 2008.

Relations with Russia have been problematic under the AEI, with controversial actions by the pro-Romanian LP leader, Mihai Ghimpu, in mid-2010 raising fears (subsequently abated) of Russian retaliation in the form of strong economic pressure on Moldova. These included attempting, as acting president, to decree a Day of Soviet Occupation. Relations with Russia will remain delicate, especially given the still-unresolved situation with regard to Transdniestr. Nevertheless, the other elements of the AEI�especially the DP�can be expected to argue in favour of a pragmatic path, seeking to preserve relations with Russia at the same time as deepening ties with the EU.

Transdniestr

International relations

Election watch

6 Moldova


Economic policy outlook

The continuity between the previous and new governments has reduced the risk of a deterioration in relations with the IMF and other lenders, and we expect the new government to continue to purse IMF-friendly policies. Under the three-year, US$574m IMF deal approved in January 2010, the previous government targeted a narrowing of the budget deficit, to a large extent through an adjustment of current expenditure. The "Rethink Moldova" medium-term reform programme, unveiled in early 2010, is backed by a total of �1.9bn (US$2.6bn) from international multilateral and bilateral donors in 2010-13, including the IMF. Reforms envisaged include overhauling the civil service and the judiciary; combating corruption; reducing the number of business licences, permits and authorisations; supporting small and medium-sized enterprises (SMEs); and improving education and health. Compliance under the IMF programme has so far been good, and the government has announced some progress in reforming the business environment, including the removal of a number of formal and informal export and import restrictions. Nevertheless, reforms requiring institutional change are likely to remain a challenge.

We expect the new government to draw up a deficit-narrowing 2011 budget that meets IMF requirements. Fiscal tightening and a continuing economic recovery are likely to result in a further narrowing of the budget deficit in 2011-12, from an estimated 5% of GDP in 2010. The previous government targeted a contraction of the deficit to 3.4% of GDP in 2011 and 2.6% in 2012. We forecast a deficit of 4% in 2011, narrowing to 3.3% in 2012.

The National Bank of Moldova (NBM, the central bank) has, starting in 2010, pursued a more explicit policy of inflation-targeting. Its aim is to lower inflation to 5%, ±1.5 percentage points, in 2012. Owing largely to non-monetary factors, inflation rose sharply in the first quarter of 2010. This prompted the NBM to raise the base rate twice in the first quarter of that year, to 7% in March. Although inflation subsequently stabilised, the NBM raised the base rate to 8% in January 2011, citing rising energy prices and domestic demand. In real terms the rate is close to zero, suggesting that the NBM may need to tighten monetary policy further.

Economic forecast

International assumptions summary (% unless otherwise indicated)

2009 2010 2011 2012

Real GDP growth World -0.8 4.8 4.0 4.1

Euro area -4.1 1.7 1.5 1.3

EU27 -4.2 1.9 1.6 1.6

Exchange rates Rb:US$ 31.74 30.31 30.12 30.00

US$:� 1.393 1.326 1.250 1.200

SDR:US$ 0.646 0.652 0.660 0.670

International assumptions

Policy trends

Fiscal policy

Monetary policy

Moldova 7


International assumptions summary (% unless otherwise indicated)

2009 2010 2011 2012

Financial indicators � 3-month interbank rate 1.23 0.84 1.00 1.50

US$ 3-month commercial paper rate 0.26 0.24 0.31 0.70

Commodity prices Oil (Brent; US$/b) 61.9 79.6 90.0 82.3

Food, feedstuffs & beverages (% change in US$ terms) -20.4 11.7 19.3 -8.6

Total non-oil commodities (% change in US$ terms) -22.5 24.0 13.9 -6.2

Industrial raw materials (% change in US$ terms) -25.6 43.8 7.2 -2.8

Note. Regional GDP growth rates weighted using purchasing power parity exchange rates.

Against a background of slower external demand growth and an easing of the initial post-recession bounceback, we forecast that real GDP growth will moderate to 4% in 2011 from an estimated 5.7% in 2010. Our estimate for 2010 growth has been raised from 4.5% after faster than expected year-on-year growth of 6.5% in January-September, also prompting an upward adjustment in our 2011 forecast from 3.5%. Real GDP growth in the EU, an important economic partner for Moldova, is forecast to slow to 1.6% in 2011 from an estimated 1.9% in 2010. In Russia and Ukraine, important export markets, growth is forecast to pick up modestly (in the case of Russia) and to slow (in the case of Ukraine) in 2011, and the Romanian economy is expected to recover only slightly in that year. An improved economic situation in important external partners in 2012 should allow the Moldovan economy to grow by a forecast 4.3% in that year (raised from 4% previously).

IMF lending will support confidence over the forecast period, and will help to stabilise the fiscal and economic situation. Together with substantial financial assistance from other bilateral and multilateral lenders (much of it in the form of grants), it will also support economic growth. Although budget constraints and still-high unemployment will limit consumption growth, a continuing recovery in household consumption will be supported in 2011-12 by growth (albeit subdued compared with the pre-crisis period) in remittance inflows from Moldovans working abroad. Fixed investment should be supported by the focus under international lending programmes on public investment in infrastructure. However, net exports will exert a drag on overall GDP growth as recovering domestic demand pulls in imports.

The possibility that Russia would increase economic pressure on Moldova should political relations deteriorate remains a downside risk to the growth outlook. However, the risk that lending from the IMF and other international sources could be lower than expected has now eased in the light of the continuity of government following the parliamentary election in November 2010.

Demand-pull inflationary pressures will be subdued in 2011-12. Although a further increase in the price of gas imports from Russia and faster global food price inflation will exert upward pressure in 2011, disinflation will be assisted by the high base of comparison, after inflation rose sharply in the first half of

Economic growth

Inflation

8 Moldova


2010. We forecast end-2011 inflation of 6.3%, down from 8.1% at end-2010. Inflation is forecast to slow further in 2012, to 5.6% by year-end; although economic activity is expected strengthen moderately in that year, the adjustment of gas import prices to European levels should be completed in 2011, and global food prices are forecast to fall.

We forecast that the leu will, on average, be broadly steady in 2011-12, supported by the more stable external and domestic economic situation. Although the current-account deficit will remain large, it will be much smaller than it was until 2009, and the currency will be supported by inflows from foreign lenders and donors. However, domestic political uncertainty, and the economy's vulnerability to external shocks, will remain sources of potential downward pressure on the leu. In addition, the NBM's greater focus on inflation-targeting implies reduced currency intervention, suggesting greater intra-year exchange-rate volatility.

Although exports will continue to grow, the trade in goods deficit is forecast to widen in nominal terms in 2011-12 as the ongoing recovery in domestic demand continues to pull in imports. However, the deficit is expected to remain smaller than in the pre-crisis period. The sizeable trade deficit will continue to be partly offset by inflows of earnings sent by Moldovans working abroad. These are forecast to grow at a relatively slow pace in 2011-12 as the economies that host Moldovan workers continue to recover. The current-account deficit is forecast to average about 11% of GDP in 2011-12, around the same level as in 2010.

Forecast summary (% unless otherwise indicated)

2009 a 2010 a 2011b 2012b

Real GDP growth -6.5 5.7 c 4.0 4.3

Industrial production growth -22.2 7.0 4.5 4.8

Agricultural production growth -9.9 7.0 2.5 3.0

Consumer price inflation (av) -0.1 7.3 6.7 5.9

Consumer price inflation (end-period) 0.4 8.1 6.3 5.6

Lending rate (av) 20.5 16.4 15.0 14.0

Deposit rate (av) 14.9 7.7 7.0 7.0

Consolidated government balance (% of GDP) -6.8 -5.0 c -4.0 -3.3

Exports of goods fob (US$ m) 1,332 1,530 c 1,690 1,780

Imports of goods fob (US$ m) -3,276 -3,780 c -4,100 -4,440

Current-account balance (US$ m) -465 -605 c -631 -740

Current-account balance (% of GDP) -8.6 -11.0 c -10.4 -11.2

External debt (year-end; US$ m) 3,826 c 4,273 c 4,731 5,133

Exchange rate Lei:US$ (av) 11.11 12.37 12.46 12.62

Exchange rate Lei:US$ (end-period) 12.30 12.15 12.51 12.73

Exchange rate Lei:� (av) 15.48 16.40 15.57 15.14

Exchange rate Lei:Rb (av) 0.350 0.408 0.414 0.421

a Actual. b Economist Intelligence Unit forecasts. c Economist Intelligence Unit estimates.

Exchange rates

External sector

Moldova 9


Monthly review: February 2011

The political scene

On January 14th parliament approved a reconstituted Alliance for European Integration (AEI) government, which is commonly being called the AEI-2. The formation of the new government followed the Constitutional Court's validation on December 24th of the results of the early parliamentary election at end-November, after a vote recount did not alter the distribution of seats in the new parliament.

The new AEI coalition comprises the three largest parties in the previous ruling coalition, the Liberal Democratic Party (LDP; which has 32 seats), the Democratic Party (DP; with 15 seats) and the Liberal Party (LP; 12 seats), with their former coalition partner, the Our Moldova Alliance (OMA), having failed to secure any seats in the 101-seat parliament (January 2011, The political scene). After a month of parallel negotiations with the opposition Party of Communists of the Republic of Moldova (PCRM; with 42 seats) over a possible centre-left coalition on the one hand, and with the LDP/LP on a renewed centre-right alliance the other, on December 30th the DP opted for a renewed centre-right alliance, and a coalition agreement was signed.

In order to avoid the kind of misunderstandings that characterised the previous AEI administration, the leaders of the three coalition parties signed an agreement of principles on the functioning of the coalition. In line with this, the DP leader, Marian Lupu, has been elected as chair of parliament and confirmed as acting president, the plan being for the LP leader, Mihai Ghimpu, to be elected parliamentary chair after Mr Lupu is elected president. The LDP leader, Vlad Filat, has been reappointed as prime minister. The PCRM abstained from voting on these measures, suggesting that it could again seek to boycott the election of the president. The LDP was allocated seven of the 16 ministries, the DP five and the LP four, meaning that the DP and LP combined could outvote the LDP.

The new government's political programme is little changed from its predecessor's. Reform of the judiciary and law enforcement bodies remain among its main domestic priorities, with the title of the government programme approved by parliament�"European Integration: Freedom, Democracy, Prosperity"�indicating that European integration continues to be the main foreign policy goal. The programme also lists as a priority the resolution of the Transdniestrian conflict through the resumption of negotiations under the "5+2" format, the withdrawal of Russian troops from the region, and their replacement with an international civilian mission. The new coalition will next elaborate a strategy for electing the president in order to break the constitutional deadlock on the issue that has prevailed since 2009.

Mr Filat was promptly congratulated on his reappointment by the European Commission president, José Manuel Barroso, who expressed his support for Moldova's efforts to deepen relations with the EU. The EU had already made

A reconstituted AEI government is approved

The EU welcomes the new government

10 Moldova


clear its preference for a reconstituted AEI coalition during the coalition negotiations, including through the visit to Moldova in early December by the president of the European Parliament, Jerzy Buzek, who discussed Moldova's European integration and promised a new �100m (US$133m) grant. Under the LDP-controlled Ministry of Foreign Affairs and European Integration and its recently reappointed minister, Iurie Leanca, relations with the EU improved significantly in 2010. The EU has pledged significant financial support to the country, and launched negotiations on an Association Agreement and a possible visa-free travel regime.

Russia did not immediately react to the reconstitution of the AEI, having shown its preference for a PCRM-DP coalition (January 2011, The political scene). Nevertheless, within the new coalition, the DP has argued for balancing the European direction of foreign policy with the aim of at the least avoiding antagonising Russia, and if possible adding content to the strategic partnership stipulated in the two countries' basic treaty. In 2010 relations with Russia were severely tested by controversial moves by the pro-Romanian Mr Ghimpu, such as his attempt to introduce a Day of Soviet Occupation (August 2010, The political scene).

Economic policy

The new government's first task will be to draft a 2011 budget, as well as an economic programme that proves acceptable to the IMF, the EU and other lenders. Given the country's expanding trade and current-account deficits, IMF credits have been critical in supporting the balance of payments (see Economic performance). The budget outcome in late 2010 was a marked improvement on the performance of the previous year, helped by an economic recovery that exceeded the expectations of the government and its lenders. The government was targeting a 5.4% of GDP budget deficit in 2010. However, in January-September 2010 the national (consolidated) budget deficit shrank to 2.9% of GDP (Lei1.5bn; US$120m) from 6.2% (Lei2.75bn) a year earlier. At the end of November 2010 the national budget deficit totalled Lei2.02bn, a year-on-year contraction of 34%.

National budget, Jan-Nov 2009 2010

Outturn (Lei m) Outturn (Lei m) % of target % changea

Total revenue 20,757.0 23,795.4 100.1 14.6

Personal income tax 1,294.3 1,367.8 102.9 5.7

Corporate profit tax 406.1 440.8 124.2 8.5

Value-added tax 6,856.4 8,293.4 102.6 21.0

Excise duties 1,336.7 1,863.5 102.4 39.4

Grants 871.8 722.2 60.5 -17.2

The 2010 budget deficit undershoots its target

Moldova 11


National budget, Jan-Nov 2009 2010

Outturn (Lei m) Outturn (Lei m) % of target % changea

Total expenditure 23,830.6 25,814.7 89.6 8.3

General public services 1,235.5 1,174.8 84.8 -4.9

Public order & safety 1,300.7 1,171.6 94.7 -9.9

Education 4,844.1 5,754.0 88.2 18.8

Health 3,367.7 3,489.9 93.1 3.6

Social security 8,230.3 9,248.6 97.3 12.4

Agriculture, forestry, fishing & hunting 714.6 772.1 84.0 8.0

Debt servicing 780.6 502.6 97.4 -35.6

Balance -3,073.6 -2,019.3 40.2 -34.3

a Year on year.

Source: Ministry of Finance website.

The National Bank of Moldova (NBM, the central bank) raised its key rates by 1 percentage point on December 30th, in anticipation of increasing inflationary pressure in 2011. The increase, which came into effect on January 7th, raised the base rate on short-term monetary policy instruments to 8%, the overnight loan rate to 11%, and the overnight deposit rate to 5%. The NBM left the required reserve ratio on domestic and foreign currencies unchanged at 8%. The NBM last raised rates in March 2010.

Interest rates (av; %)

Source: National Bank of Moldova.

4.0

8.0

12.0

16.0

20.0

24.0

28.0Deposit rateLending rate

DecOctAugJunAprFeb10



Dec2007

According to the NBM's statement, core inflation�the monetary indicator that excludes food, fuel and price-regulated goods and services�has been declining since September 2010 (see Economic performance). However, the NBM cited several factors behind its decision to raise rates, including higher oil and gas prices. From January 1st 2011 Moldova will pay the Russian state-owned gas monopoly, Gazprom, US$293 per 1,000 cu metres for gas supplies, up from US$263 in the fourth quarter of 2010. As a result, Moldovagaz, the gas transmission company owned jointly by Moldova and Gazprom, has asked the National Agency for Energy Regulation (ANRE), the national energy price regulator, to raise consumer tariffs by 13.1%. ANRE last raised tariffs in May 2010, and is expected to announce its decision later in January.

The central bank raises key interest rates

12 Moldova


Rising domestic demand as the economic recovery continues (see Economic performance) has added further inflationary pressures. As evidence, the NBM cites the fact that in November the volume of new loans issued by the banking sector was up by 106% year on year, to Lei2.32bn. It added that the interest rate rise would stimulate savings and improve conditions on the foreign-exchange market (the leu depreciated in November-December against the US dollar, adding further inflationary pressures to the cost of imported goods).

The NBM also revised its 2010-12 monetary policy strategy, extending the time horizon to 24 months. For 2011-12 the central bank is targeting what it terms "a stable inflation rate in mid-single digits", while establishing conditions to bring inflation down to 5%, ±1.5 percentage points, in 2012. In addition to its current series of quarterly and monthly reports, the NBM will in 2011 be publishing a new quarterly inflation report.

Economic performance

The economy has been recovering from the recession of 2009 at a faster than expected pace. In the third quarter of 2010 GDP grew by 8% year on year in real terms, to Lei20.5bn at current prices, according to National Bureau of Statistics data. This marked an acceleration from 6.4% year-on-year growth in the second quarter and 4.7% in the first quarter. In January-September 2010 the economy grew by 6.5% year on year, to Lei52.2bn.

In the third quarter economic growth continued to be supported by private consumption, which maintained a year-on-year expansion of 6.2%�broadly unchanged from the second-quarter rate (October 2010, Economic performance). Private consumption has benefited from a pick-up in remittance inflows following a slump in 2009. In the third quarter remittances increased by 9% year on year in US dollar terms (and by 19% in leu terms), to US$361m, according to data from the NBM. Furthermore, the NBM estimates that it records only 60% or so of remittance inflows. Remittances, as well as infrastructure aid, also contributed to a 37% year on year increase in gross fixed investment in the third quarter, up from 13.7% in the second quarter. In addition, net exports exerted less of a drag on economic growth in the third quarter, as export growth picked up sharply, to 14.7% year on year, from just 3.4% in the second quarter, whereas import growth slowed to 15.5% year on year from 18.9% in the second quarter.

Gross domestic product by expenditure, Jul-Sep 2010 Lei ma Real % change % of GDP

Private consumption 19,343 6.2 94.4

Government consumption 3,683 2.4 18.0

Gross fixed capital formation 3,614 37.0 17.6

Change in stocks 929 42.4 4.5

Exports 7,155 14.7 34.9

Imports 14,231 15.5 69.4

GDP 20,494 8.0 100.0

a Current prices.

Source: National Bureau of Statistics.

Real GDP growth accelerates in the third quarter of 2010

Moldova 13


On the production side, in line with the strong rise in investment spending, construction gross value added (GVA) recorded the fastest year-on-year growth in the third quarter, of 18%, albeit from a low base following a property slump in 2009. Construction has also been boosted by emergency reconstruction work following the mid-year floods. Wholesale and retail trade, and transport and communications, both grew by 9% year on year in the third quarter. Wholesale and retail trade was supported by increasing private consumption, and transport and communications benefited from the upturn in external trade. Rising mobile telephone and broadband subscriptions additionally boosted communications sector growth.

Agriculture grew by a respectable 7% year on year in the third quarter, despite the cold weather of early 2010 and some crop destruction by the mid-year floods. Rising world food prices contributed to the sector's profitability. In the industrial sector manufacturing also increased by 7% year on year, whereas utilities fell by a similar amount. The high cost of domestically produced electricity appears to have been a significant factor: according to NBM balance-of-payments data, the volume of imported electricity increased tenfold year on year in the third quarter. The mining sector, which essentially consists of building materials such as limestone and gravel, expanded by 10% year on year as a consequence of the construction revival.

Gross value added by sector, Jul-Sep 2010 Lei ma Real % change % of gross value added

Agriculture, hunting, forestry & fishing 2,449 6.9 14.2

Industry 2,626 5.6 15.3

Manufacturing 2,245 7.3 13.1

Mining & quarrying 98 10.4 0.6

Electricity, gas & water 282 -7.4 1.6

Services 12,501 7.9 72.7

Construction 948 18.1 5.5

Wholesale & retail trade 2,780 9.1 16.2

Transport & communications 2,607 8.8 15.2

Other services 6,166 5.5 35.9

Gross value added 17,192 6.7 100.0

a Current prices.


Annual average inflation rose from about zero in 2009 to 7.3% in 2010�above the NBM's initial target of 5%, ±1 percentage point. Year-on-year inflation ticked up in December 2009 after eight consecutive months of deflation, and rose sharply in the first quarter of 2010, after which it broadly stabilised. In December 2010 it rose to 8.1% from 7.7% in November. Core inflation (which excludes food and beverages, fuel, and price-regulated goods and services) fell to 4.4% year on year in December from a 2010 peak of 6% in March.

Rising food prices were an important inflationary driver in 2010. In December food prices were up by 2% month on month and by 7.1% year on year. The underlying causes include local weather conditions, especially in the case of fruits and vegetables, higher global food prices and rising oil prices, which affect a range of agricultural input prices, including transport and packaging. Higher

Inflation rises markedly in 2010

14 Moldova


oil prices also affected non-food goods prices, with fuel prices up by 25.1% year on year in December. The 9.7% year-on-year rise in services prices in December was also largely conditioned by energy price rises, with the cost of electricity up by 20.4% year on year, gas prices up by 26.2% and central heating prices rising by 25.3%.

Consumer price inflation, 2010 (% change, year on year)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecFood -0.6 4.2 7.0 6.8 6.0 5.3 5.8 6.3 7.1 7.2 6.7 7.1 Bread -3.8 0.8 2.0 2.8 2.6 2.4 2.4 3.5 4.0 3.6 3.7 4.4 Vegetables 19.1 41.1 47.0 42.2 34.6 21.2 20.1 22.9 22.9 25.5 16.4 9.0 Fruit 0.5 7.3 15.1 11.9 8.6 12.0 8.1 4.2 4.5 -0.2 1.6 7.5 Meat & meat products -5.4 -5.2 -3.5 -3.4 -2.9 -3.0 -2.5 -2.1 -2.0 -1.6 -0.9 -0.8 Milk & dairy products -2.5 1.0 2.4 3.8 5.5 7.0 8.1 8.5 8.7 9.1 9.3 10.8

Non-food goods 4.1 6.6 8.5 8.7 8.5 7.9 7.1 7.1 6.8 7.0 6.7 7.7 Clothing 0.0 0.4 2.1 2.3 2.1 2.7 2.3 2.3 2.6 3.4 3.2 3.4 Footwear -1.1 -1.2 -0.3 -1.4 -1.2 -0.7 -0.1 0.7 1.6 2.5 2.2 3.1 Medicines 23.0 25.8 27.3 26.4 24.8 22.2 16.7 13.4 10.9 9.0 6.5 5.4 Fuel 7.9 19.3 22.9 23.9 22.3 19.1 17.1 18.3 17.5 18.8 18.8 25.1Services 4.5 7.2 7.8 8.0 8.9 10.1 10.6 10.8 11.1 10.3 10.1 9.7 Communal & housing 5.4 12.6 12.7 12.6 14.5 17.5 17.5 17.5 18.8 19.2 19.0 18.9 Electricity 9.8 11.6 21.5 21.5 21.5 21.5 21.4 21.4 20.4 20.4 20.4 20.4 Gas -6.2 -0.8 -0.7 -0.8 5.2 13.5 13.4 13.4 21.6 26.2 26.2 26.2 Transport 5.4 7.4 9.6 11.6 12.4 12.3 12.6 12.3 12.2 3.6 3.4 3.4Total 2.8 6.1 8.1 8.1 7.9 7.8 7.6 7.8 8.0 8.0 7.7 8.1Inflation excl food 4.5 7.2 8.9 8.5 8.7 9.0 8.7 8.9 8.8 8.5 8.2 8.5Inflation excl fuel 2.2 5.2 7.2 7.1 7.1 7.0 7.1 7.1 7.5 7.4 7.0 7.0Inflation excl price-regulated goods

& services 4.3 5.6 7.6 7.4 7.0 6.3 6.2 6.3 6.5 6.8 6.4 6.9

Inflation excl food, fuel and price-regulated goods & services 3.6 4.3 6.0 5.4 5.1 5.3 5.2 5.2 4.8 4.9 4.5 4.4


According to NBM data, in the third quarter of 2010 the current-account deficit grew by more than one-half year on year, to US$118m, and its share of GDP grew to 7.1% from 5.2%. In January-September the deficit amounted to 10.8% of GDP, up from 8.8% in the year-earlier period. The growing trade in goods deficit remained the main driver of the current-account imbalance. In the third quarter of 2010 exports grew by 23.4% year on year, to US$403m, and imports grew by 20.9%, to US$955m. Given the much higher import base, the trade deficit widened by 19%, to US$552m, over this period.

Current-account deficit grows again in third quarter

Moldova 15


Balance of payments (US$ m)

2009 2010 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year 1 Qtr 2 Qtr 3 QtrExports fob 289.1 311.2 326.7 404.6 1,331.6 322.6 319.1 403.2Imports fob -743.7 -742.3 -790.1 -999.7 -3,275.8 -749.3 -903.6 -955.2

Trade balance -454.6 -431.1 -463.4 -595.1 -1,944.2 -426.8 -584.6 -552.1Services exports 149.7 158.5 172.3 188.4 668.9 141.1 165.0 179.4

Services imports -162.9 -169.1 -183.0 -197.8 -712.9 -155.2 -174.8 -199.4Net services -13.2 -10.6 -10.7 -9.5 -44.0 -14.1 -9.8 -20.0

Net income 26.8 76.5 79.0 120.7 302.9 55.0 90.4 101.8Net transfers 215.4 311.4 319.3 374.5 1,220.6 238.0 317.4 352.7Current-account balance -225.6 -53.8 -75.9 -109.3 -464.6 -147.9 -186.6 -117.6Capital & financial account 326.2 54.3 7.0 19.4 406.8 72.4 146.0 58.6Direct investments 41.2 17.4 40.2 22.3 121.1 42.4 33.6 75.1

Portfolio investments 1.0 -3.5 0.1 -3.4 -5.8 0.0 1.8 1.7Other investments -203.8 55.8 45.5 210.7 108.2 69.8 134.9 103.1Reserve assets 490.1 -12.7 -72.1 -204.7 200.6 -34.1 -15.5 -114.9

Net errors & omissions -100.6 -0.5 68.9 90.0 57.8 75.5 40.6 59.0

Note. The National Bank of Moldova's data revisions mean that its figures no longer match exactly those published by the IMF.

Source: National Bank of Moldova.

Third-quarter balance of payments

Higher energy prices drive up imports

Of the main export groups, vegetable products generated the most revenue in the third quarter of 2010 (US$100m), followed by processed foodstuffs and beverages (US$64m). Exports of alcoholic drinks were subdued, totalling only US$36m, compared with US$38m a year earlier. Despite Russia gradually easing export conditions for Moldovan wines, these accounted for only US$8.1m of sales. Belarus was the main market, taking US$10.3m, followed by Russia, Ukraine and Kazakhstan. Thus far sales outside the Commonwealth of Independent States (CIS) have been poor. The main EU market, Poland, accounted for only US$2m. However, in late 2010 the wine sector was pledged significant EU lending, as well as higher duty-free export quotas into the EU, which should eventually result in higher penetration of the EU. Moldova's imports remain dominated by energy, and have consequently reflected rising global prices. Energy imports totalled US$166m (fob) in the third quarter of 2010, compared with US$128m a year earlier. Of this, petrol accounted for 42%, diesel accounted for 36% and gas accounted for 16%. Over this period the volume of imported gas fell by 12% year on year and that of petrol fell by 7%, whereas diesel imports grew by 29%, partly reflecting higher agricultural activity.

Foreign direct investment is beginning to recover

In the third quarter of 2010 the small services deficit grew to US$20m from US$11m a year earlier, as a result of higher outflows on transport and travel, the two main components of this account. The income surplus grew by almost one-third, to US$102m, over this period. Workers' compensation (earnings from migrant workers abroad for temporary or seasonal work) accounted for US$168m of the US$172m of inflows, and repatriated income on direct investment accounted for US$44m of the US$71m of outflows. The current transfers surplus increased by 10% year on year in the third quarter, to US$353m. Net workers' remittances (from long-term workers abroad) rose by 8% year on year, to US$192m, which was still substantially down on the US$313m remitted in the third quarter of 2008. Other sources of transfers included government, technical and humanitarian assistance, including relief for the severe flooding in July 2010. The capital and financial account surplus amounted to US$59m in the third quarter. This covered only one-half of the current-account deficit, with the remainder accounted for by a US$59m net inflow from errors and omissions. Net foreign direct investment (FDI) almost doubled year on year, to US$75m, and included increased equity in the banking sector. Romania is the main foreign investor in the banking sector, followed by Italy and France. In other sectors Russia is the

16 Moldova


primary investor, followed by Cyprus and the US. Portfolio investment remained insignificant. Other investment grew to US$103m from US$46m a year earlier, and included US$91m received by the National Bank of Moldova (NBM) and the government from the IMF. Under the NBM methodology, the capital and financial account surplus also included a US$115m increase in foreign-exchange reserves.

Moldova 17


Data and charts Annual data and forecast

Pl ea se se e g ra p hi c b el ow

2006a 2007a 2008a 2009a 2010 b 2011c 2012c

GDP

Nominal GDP (US$ m) 3,408.3 4,401.2 6,054.8 5,404.6 5,503.2 6,066.5 6,614.5

Nominal GDP (Lei m) 44,754 53,430 62,922 60,043 68,070 75,559 83,476

Real GDP growth (%) 4.8 3.0 7.8 -6.5 5.7 4.0 4.3

Expenditure on GDP (% real change)

Private consumption 7.8 3.6 5.8 -7.9 4.5 3.5 4.0

Government consumption 9.1 5.3 5.0 1.9 1.0 0.5 1.0

Gross fixed investment 21.3 25.5 2.2 -31.3 15.0 7.5 10.0

Exports of goods & services 1.1 10.5 3.4 -7.8 7.5 4.0 4.5

Imports of goods & services 9.1 14.6 2.9 -19.3 11.3 5.3 6.1

Origin of GDP (% real change)

Agriculture -2.8 -35.0 41.1 -10.9 7.0 2.5 3.0

Industry -2.3 -0.8 0.7 -19.4 7.0 4.5 4.8

Services 7.8 14.0 3.3 -3.6 4.5 4.0 4.3

Population and income

Population (m) 3.6 3.6 3.6 3.6 3.6 3.6 3.6

GDP per head (US$ at PPP) 2,563 2,724 3,009 2,843 2,991 3,091 3,237

Recorded unemployment (av; %) 1.5 1.4 1.4 3.1 3.4 3.2 2.8

Fiscal indicators (% of GDP)

Consolidated budget revenue 39.9 41.7 40.6 38.7 40.0 40.5 40.7

Consolidated budget expenditure 40.2 42.0 41.6 45.5 45.0 44.5 44.0

Consolidated budget balance -0.3 -0.2 -1.0 -6.8 -5.0 -4.0 -3.3

Public debt 29.8 23.5 18.7 25.4b 25.3 26.5 26.4

Prices and financial indicators

Exchange rate Lei:US$ (av) 13.13 12.14 10.39 11.11 12.37 a 12.46 12.62

Exchange rate Lei:� (av) 16.49 16.62 15.28 15.48 16.40 a 15.57 15.14

Consumer prices (end-period; %) 14.0 13.3 7.2 0.4 8.1 a 6.3 5.6

Stock of money M1 (% change) 12.8 32.1 6.3 13.8 20.0 15.0 16.0

Stock of money M2 (% change) 23.6 39.8 15.9 3.2 15.0 17.0 18.0

Lending interest rate (av; %) 18.1 18.8 21.1 20.5 16.4 a 15.0 14.0

Current account (US$ m)

Trade balance -1,583 -2,298 -3,223 -1,944 -2,250 -2,410 -2,660

Goods: exports fob 1,061 1,373 1,646 1,332 1,530 1,690 1,780

Goods: imports fob -2,644 -3,671 -4,869 -3,276 -3,780 -4,100 -4,440

Services balance -22 -25 -1 -44 -50 -53 -59

Income balance 403 416 599 303 351 387 423

Current transfers balance 814 1,232 1,639 1,221 1,343 1,446 1,555

Current-account balance -388 -674 -987 -465 -605 -631 -740

External debt (US$ m)

Debt stock 2,437 3,182 3,787b 3,826b 4,273 4,731 5,133

Debt service paid 334 339 501 477b 460 425 510

Principal repayments 258 239 414 415b 398 359 415

International reserves (US$ m)

Total international reserves 775 1,334 1,672 1,480 1,718 a 1,950 2,100

a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.

Source: IMF, International Financial Statistics.

18 Moldova


Quarterly data Pl ea se se e g ra p hi c b el ow

2009 2010

1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr

Central government finance (Lei m)

Revenue 4,975 5,858 5,824 6,587 5,582 6,817 6,712 n/a

Expenditure 6,057 6,854 6,496 7,936 6,451 7,254 6,903 n/a

Balance -1,083 -995 -672 -1,348 -869 -437 -191 n/a

Employment, wages and prices

Unemployed, registered (end-period; �000) 35.4 35.1 37.0 38.7 54.1 49.5 43.3 n/a

Nominal monthly wages (Lei) 2,569.0 2,779.0 2,758.0 2,886.0 2,740.2 2,960.2 3,026.0 n/a

Nominal monthly wages (% change, year on year) 12.4 8.0 9.6 5.1 6.7 6.5 9.7 n/a

Consumer prices (2000=100) 143.5 142.6 140.8 144.4 151.9 154.0 152.1 155.9

Consumer prices (% change, year on year) 3.1 -0.9 -1.7 -0.6 5.9 8.0 8.0 8.0

Financial indicators

Exchange rate Lei:US$ (av) 10.8 11.2 11.3 11.9 12.6 12.9 12.2 11.9

Exchange rate Lei:US$ (end-period) 11.0 11.2 11.5 12.3 12.4 12.8 12.0 12.2

Deposit rate (av; %) 20.0 16.6 12.9 10.4 9.1 7.2 7.7 6.7

Lending rate (av; %) 23.1 21.2 18.2 19.6 17.4 16.7 16.1 15.3

Money market rate (av; %) 16.5 10.8 n/a 8.0 4.5 10.8 n/a n/a

Treasury-bill rate (av; %) 15.7 16.6 6.5 6.6 5.8 7.7 7.3 n/a

M1a (end-period; Lei m) 8,966 10,168 11,223 13,207 13,145 13,498 14,434 n/a

M1 (% change, year on year) -12.4 -6.4 -1.6 13.8 46.6 32.8 28.6 n/a

M2a (end-period; Lei m) 28,116 29,060 29,579 32,684 32,666 32,951 34,765 n/a

M2 (% change, year on year) -1.3 -3.6 -8.6 3.2 16.2 13.4 17.5 n/a

Sectoral trends

Retail sales (Lei m) 4,189 4,808 5,403 5,525 5,090 6,024 6,856 n/a

Foreign tradeb (US$ m)

Exports fob 289.1 311.2 326.7 404.6 322.6 319.1 403.2 n/a

CISc 96.6 114.3 116.9 162.7 115.7 122.5 152.7 n/a

Imports fob -743.7 -742.3 -790.1 -999.7 -749.3 -903.6 -955.2 n/a

CISc 322.8 237.6 251.4 328.6 287.3 250.9 295.8 n/a

Trade balance -454.6 -431.1 -463.4 -595.1 -426.8 -584.6 -552.1 n/a

Foreign payments (US$ m)

Merchandise trade balance -454.6 -431.1 -463.4 -595.1 -426.8 -584.6 -552.1 n/a

Services balance -13.2 -10.6 -10.7 -9.5 -14.1 -9.8 -20.0 n/a

Income balance 26.8 76.5 79.0 120.7 55.0 90.4 101.8 n/a

Net transfer payments 215.4 311.4 319.3 374.5 238.0 317.4 352.7 n/a

Current-account balance -225.6 -53.8 -75.9 -109.3 -147.9 -186.6 -117.6 n/a

Reserves excl gold (end-period) 1,132.3 1,210.1 1,290.6 1,480.3 1,464.1 1,421.8 1,619.3 1,717.7

a National Bank of Moldova. b Balance-of-payments basis. c Commonwealth of Independent States.

Sources: National Bank of Moldova; IMF, International Financial Statistics; Interstate Statistical Committee of the CIS; Department of Statistics and Sociology.

Moldova 19


Monthly data Pl ea se se e g ra p hi c b el ow

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Exchange rate Lei:US$ (av) 2008 11.29 11.23 10.82 10.46 10.34 10.08 9.81 9.68 9.93 10.30 10.37 10.39

2009 10.45 10.56 10.82 11.15 11.26 11.19 11.22 11.21 11.26 11.19 11.07 11.93

2010 12.37 12.75 12.58 12.48 12.67 12.90 12.60 12.13 12.24 11.76 11.80 12.15

Exchange rate Lei:US$ (end-period) 2008 11.28 11.19 10.61 10.37 10.25 9.92 9.71 9.66 10.36 10.36 10.38 10.40

2009 10.52 10.66 10.96 11.30 11.22 11.24 11.20 11.21 11.50 11.06 11.11 12.30

2010 12.53 12.80 12.40 12.59 12.83 12.84 12.27 12.20 12.02 11.81 12.12 12.15

Real effective exchange rate (2000=100; CPI-based) 2008 111.3 112.6 113.8 118.1 120.9 121.8 121.8 128.5 129.9 134.3 140.1 138.2

2009 142.4 144.1 137.8 131.5 126.4 123.8 122.4 119.9 118.5 118.8 120.1 113.7

2010 112.6 114.2 116.2 117.7 121.3 120.9 119.1 121.0 119.5 121.0 n/a n/a

Consolidated budget revenue (Lei m) 2008 1,400 1,789 2,279 2,106 1,846 2,372 2,000 2,057 2,344 2,191 2,040 3,065

2009 1,437 1,673 1,865 2,041 1,816 2,002 2,002 1,819 2,003 1,972 2,128 2,487

2010 1,521 1,786 2,276 2,344 2,112 2,362 2,198 2,122 2,391 2,340 2,343 n/a

Consolidated budget expenditure (Lei m) 2008 1,514 1,902 1,774 2,509 1,796 2,210 2,386 1,972 2,041 2,542 2,157 3,316

2009 1,577 2,174 2,307 2,358 2,056 2,440 2,478 1,834 2,184 2,002 2,422 3,512

2010 1,802 2,148 2,501 2,329 2,242 2,683 2,415 2,081 2,407 2,442 2,765 n/a

Consolidated budget balance (Lei m) 2008 -114.4 -112.3 504.5 -403.1 50.1 161.8 -385.4 85.1 302.9 -351.4 -117.5 -251.2

2009 -140.1 -500.2 -442.2 -317.3 -240.3 -437.7 -475.6 -15.0 -181.8 -30.0 -293.4 -1,025.0

2010 -281.9 -362.1 -224.8 14.7 -130.3 -320.9 -217.0 41.2 -15.3 -101.3 -421.6 n/a

M1 (end-period; % change, year on year) 2008 32.1 34.9 28.9 33.0 26.9 24.2 23.5 25.2 19.8 14.3 11.6 6.3

2009 3.0 -4.0 -12.4 -15.3 -10.2 -6.4 -3.1 -4.5 -1.6 0.1 6.0 13.8

2010 22.3 23.7 46.6 40.4 33.9 32.8 27.8 26.4 28.6 35.7 n/a n/a

M2 (end-period; % change, year on year) 2008 42.0 44.3 42.8 43.3 39.4 36.4 36.3 33.5 30.7 23.4 19.4 15.9

2009 9.2 4.7 -1.3 -4.1 -3.0 -3.6 -6.7 -7.6 -8.6 -6.6 -2.3 3.2

2010 7.9 9.4 16.2 15.9 13.0 13.4 15.7 15.0 17.5 21.4 n/a n/a

Deposit rate (av; %) 2008 16.1 15.6 15.9 16.4 17.2 18.4 18.7 18.8 19.0 19.4 19.9 19.8

2009 20.7 19.8 19.4 18.7 16.0 15.0 14.9 13.0 10.8 10.7 10.6 9.8

2010 9.7 8.5 9.1 8.3 6.5 6.7 7.8 8.0 7.4 6.8 6.8 6.5

Lending rate (av; %) 2008 19.2 18.9 19.1 19.5 20.1 21.1 21.5 22.8 23.0 22.3 22.8 22.6

2009 23.3 22.9 23.1 22.6 22.2 18.9 18.0 17.7 19.0 19.6 18.9 20.3

2010 17.0 17.8 17.3 16.9 16.8 16.5 16.0 16.4 15.8 15.9 15.2 14.8

Industrial output (cumulative; % change, year on year) 2008 4.4 9.6 7.7 7.2 5.0 4.6 3.6 2.8 2.8 2.0 1.2 0.7

2009 -25.1 -26.3 -24.2 -25.7 -25.3 -24.9 -24.7 -24.6 -24.3 -24.1 -23.2 -22.2

2010 5.0 4.1 4.9 5.5 6.1 6.6 5.5 5.2 6.3 7.6 7.6 n/a

Consumer prices (av; % change, year on year) 2008 14.0 15.0 15.6 16.3 17.0 15.7 13.4 11.7 10.6 9.8 8.4 7.2

2009 5.6 2.9 1.0 -0.3 -1.6 -0.8 -0.5 -2.3 -2.3 -1.6 -0.7 0.4

2010 2.8 6.1 8.1 8.1 7.9 7.8 7.6 7.8 8.0 8.0 7.7 8.1

20 Moldova


Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Nominal average wage (cumulative; Lei) 2008 2,266 2,245 2,286 2,328 2,370 2,429 2,446 2,455 2,458 2,475 2,490 2,530

2009 2,555 2,537 2,569 2,620 2,642 2,674 2,695 2,696 2,702 2,697 2,702 2,748

2010 2,700 2,684 2,740 2,767 2,804 2,850 2,878 2,897 2,909 2,910 2,924 n/a

Foreign-exchange reserves excl gold (US$ m) 2008 1,350.9 1,364.8 1,424.3 1,437.9 1,446.7 1,525.9 1,699.4 1,775.6 1,803.9 1,633.7 1,598.5 1,672.4

2009 1,504.4 1,365.0 1,132.3 1,102.0 1,188.8 1,210.1 1,182.6 1,302.9 1,290.6 1,302.6 1,374.5 1,480.3

2010 1,464.2 1,465.3 1,464.1 1,461.9 1,415.0 1,421.8 1,507.5 1,551.4 1,619.3 1,645.5 1,610.9 1,717.7

Sources: IMF, International Financial Statistics; Haver Analytics.

Moldova 21


Annual trends charts Pl ea se se e g ra p hi c b el ow

Annual trends charts

Source: Economist Intelligence Unit. Source: Economist Intelligence Unit.

Gross fixed investment(% of GDP)

Trade balance(% of GDP)



Real GDP growth(% change)

Consumer price inflation(av; %)

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0 World East-central Europe Moldova

1211100908072006-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0


1211100908072006

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0


1211100908072006-60.0

-50.0

-40.0

-30.0

-20.0

-10.0

0.0 East-central Europe Moldova

1211100908072006

Principal exports, 2009(share of total) (share of total)

Principal imports, 2009

Textiles19.9%

Others19.5%

Machinery & equipment 10.7%

Food products 21.7%

Metals & metal productss2.3%

Chemicals 4.4%

Vegetable products 21.5%

Chemicals 11.2%

Others25.0%

Food products 8.8%

Mineral products 21.9%

Machinery & equipment

14.3%

Plastics & rubber5.7%

Metal & metal products5.6%

Textiles 7.5%

22 Moldova


Monthly trends charts Pl ea se se e g ra p hi c b el ow

Monthly trends charts

Consumer price inflation (% change, year on year)

Government finances(Lei m)

Monetary aggregates(% change, year on year)

Foreign-exchange reserves(US$ m)

Exchange rate(Lei:US$; av; inverted scale)

Oil: Brent crude price(US$/b; av)

Source: Economist Intelligence Unit.Source: Economist Intelligence Unit.



20

40

60

80

100

120

140

OctJulAprJan10

OctJulAprJan09

OctJulAprJan08

OctJulApr2007

13.5

13.0

12.5

12.0

11.5

11.0

10.5

10.0

9.5

OctJulAprJan10

OctJulAprJan09

OctJulAprJan08

OctJulApr2007

600

800

1,000

1,200

1,400

1,600

1,800

2,000

OctJulAprJan10

OctJulAprJan09

OctJulAprJan08

OctJulApr2007

-5.0

0.0

5.0

10.0

15.0

20.0

OctJulAprJan10

OctJulAprJan09

OctJulAprJan08

OctJulApr2007

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0 M2 M1

OctJulAprJan10

OctJulAprJan09

OctJulAprJan08

OctJulApr2007

-2,000

-1,000

0

1,000

2,000

3,000

4,000 Balance Revenue Expenditure

OctJulAprJan10

OctJulAprJan09

OctJulAprJan08

OctJulApr2007

Moldova 23


Comparative economic indicators Pl ea se se e g ra p hi c b el ow

Comparative economic indicators, 2009

Gross domestic product(US$ bn; market exchange rates)

Gross domestic product(% change, year on year)

Consumer prices(% change, year on year)

Sources: Economist Intelligence Unit estimates; national sources.

Sources: Economist Intelligence Unit estimates; national sources.Sources: Economist Intelligence Unit estimates; national sources.

Sources: Economist Intelligence Unit estimates; national sources.

Gross domestic product per head(US$ '000; market exchange rates)

0 20 40 60 80 100 120 140 160 180 200

Kyrgyz RepublicTajikistanMoldova

TurkmenistanArmenia

MacedoniaGeorgiaAlbania

Bosnia and HercegovinaEstonia

LatviaUzbekistan

LithuaniaAzerbaijan

SerbiaBulgariaBelarus

SloveniaCroatia

SlovakiaKazakhstan

UkraineHungaryRomania

Czech RepublicPolandRussia

0.0 5.0 10.0 15.0 20.0

TajikistanKyrgyz Republic

UzbekistanMoldova

TurkmenistanGeorgiaUkraine

ArmeniaAlbania

MacedoniaBosnia and Hercegovina

AzerbaijanBelarus

SerbiaBulgaria

KazakhstanRomania

RussiaLithuania

PolandLatvia

HungaryCroatiaEstonia

SlovakiaCzech Republic

Slovenia

-2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0

MacedoniaBosnia and Hercegovina

EstoniaMoldovaSlovenia

Czech RepublicAzerbaijan

SlovakiaGeorgiaAlbaniaCroatia

BulgariaArmenia

PolandLatvia

HungaryLithuaniaRomania

TajikistanKyrgyz Republic

KazakhstanSerbia

TurkmenistanRussia

BelarusUzbekistan

Ukraine

-20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0

LatviaUkraine

LithuaniaArmeniaEstonia

SloveniaRussia

RomaniaMoldovaHungary

TurkmenistanCroatia

BulgariaSlovakia

Czech RepublicGeorgia

SerbiaBosnia and Hercegovina

MacedoniaBelarus

KazakhstanPoland

Kyrgyz RepublicAlbania

TajikistanUzbekistanAzerbaijan

1,231.8430.6

24.5

-0.05

24 Moldova


Country snapshot

Basic data

33,700 sq km

3.6m (excluding Transdniestr; end-2009)

Population in '000

Chisinau (capital) 780 (2007) Tiraspol 182 (1994) Beltsy 147 (2007) Teghina 133 (1992)

Continental

Moldovan, a dialect of Romanian and the only Romance language in the former Soviet Union. Between 1941 and 1989 it was written in the Cyrillic alphabet, which is still used in the separatist region of Transdniestr. Russian is also widely spoken

Metric system

Moldovan leu (plural lei), introduced in November 1993 to replace the interim currency, the ban, at the rate of 1 leu = 100 bani

Two hours ahead of GMT (three hours in Transdniestr)

Calendar year

January 1st (New Year's Day), January 2nd (New Year holiday), January 7th-8th (Orthodox Christmas), March 8th (International Women's Day), April 24th-25th (Orthodox Easter), May 1st (Labour Day), May 2nd (Memory/Parents' Day), May 9th (Victory Day), August 27th (Independence Day), August 31st (National Language Day)

Land area

Population

Main towns

Climate

Languages

Weights and measures

Currency

Time

Fiscal year

Public holidays

Moldova 25


Political structure

Republic of Moldova

Moldova adopted a new constitution on July 28th 1994. The Transdniestr region has declared independence, which the central government has not recognised. The region inhabited by the Gagauz minority was granted special legal status in December 1994

Parliament, a unicameral assembly with 101 members, directly elected by proportional representation

November 28th 2010 (legislative). Next parliamentary election due in 2014. The president is currently elected by parliament

President. Marian Lupu, the Democratic Party (DP) leader, is currently acting president

Constitutional amendments introduced in July 2000 diminished the role of the presidency, and increased the powers of the government and parliament. The three non-communist parties formed a government on January 14th 2011 following the parliamentary election in November 2010

Four parties won seats in the parliamentary election on November 28th 2010: the Party of Communists of the Republic of Moldova (PCRM; 42), the Liberal Democratic Party (LDP; 32); the DP (15) and the Liberal Party (LP; 12).

Prime minister Vlad Filat (LDP) Deputy prime minister & minister of foreign affairs & European Integration Iurie Leanca (LDP) Deputy prime minister in charge of reintegration Eugen Carpov (independent) Deputy prime minister & minister of economy & trade Valeriu Lazar (DP) Deputy prime minister in charge of social issues Mihai Moldovanu (LP)

Agriculture & food industry Vasile Bumacov (LDP) Construction & regional development Marcel Raducan (DP) Culture Boris Focsa (DP) Defence Vitalie Marinuta (LP) Education Mihai Sleahtitchi (LDP) Environment Gheorghe Salaru (LP) Finance Veaceslav Negruta (LDP) Health Andrei Usatai (LDP) Information technology & communications Pavel Filip (DP) Interior Alexei Roibu (LDP) Justice Alexandru Tanase (LDP) Labour, social protection & family Valentina Buliga (DP) Transport & road infrastructure Anatol Salaru (LP) Youth & sports Ion Cebanu (LP)

Dorin Dragutan

Legal system

Head of state

National government

National legislature

National elections

Main political parties

Council of ministers

Key ministers

Central bank governor

Official name

country report by the economist magazine: moldova february 2011

Documents