Moldova to register a moderate economic recovery after a severe recession, the country's GDP growth in 2021 will be 3.8% - the World Bank.
This was stated by the World Bank experts in their new, spring edition "Moldova Economic Update." WB experts state that Moldova's GDP will reach the level registered before the COVID-19 crisis only in 2022, and the uncertainty associated with the duration of the pandemic and political events creates significant immediate risks and will keep the economy below its potential. WB experts note that Moldova's GDP growth in 2021 will amount to 3.8% under more favorable conditions, including thanks to the vaccination campaign. According to WB analysts, the Moldovan economy will gain momentum thanks to a recovery in disposable income, partly due to remittances, positive tax dynamics (increased wages and transfers) and soft monetary policy. The decline in global demand, combined with the recent drought, is expected to restrict Moldovan exports. Sustained imports, supported by renewed domestic demand, will slow economic growth. Most sectors are expected to recover and agriculture will lead the sector in recovering from a poor 2020. After a severe downturn unprecedented since the 2009 global recession, Moldova will see a moderate recovery. Economic growth in 2022 is expected to remain at the level of 2021 with a slow achievement of potential in 2023. WB experts believe that all sectors of the Moldovan economy will recover as consumer and investor confidence grows amid a more favorable external environment and stimulating monetary and fiscal policy. The current account deficit is expected to worsen in 2021 as food exports decline. In the future, the current account deficit will gradually increase as the economic growth rates accelerate. WB experts expect that in 2021–2022 inflation will remain below the NBM's target band of 5% +/- 1.5 pp, but will grow as the economic recovery intensifies. The poverty rate, measured at $5.5 a day per person, is estimated to increase by 3.6 percentage points to 14.2%. Based on the assumption of economic recovery in Moldova and the main countries of destination of labor migrants, WB experts predict a decrease in the poverty level in our country to 12.3% in 2021. Moldova's budget deficit in the medium term will remain above the average historical indicators. The fiscal measures introduced to mitigate the impact of the pandemic will keep the budget deficit at around 4% of GDP in 2021, higher than the historical averages, but less than planned by the law on the state budget, partly due to less external funding and a decrease in absorptive capacity. “The fiscal stance is expected to be challenging as businesses struggle and households suffer from weak labor market conditions. As a result, public debt is expected to steadily increase, but remain relatively low by international standards,” the WB experts said. They estimate that the outlook contains significant risks, and the fragile recovery also depends on the success of the vaccination campaign. Internal risks are associated with political instability, institutional weakness and political constraints in the implementation of judicial and structural reforms. WB experts draw attention to the fact that fragile economic conditions and low levels of productivity are exacerbated by significant government influence in the economy, shrinking fiscal space, low levels of financial intermediation and governance problems. Promoting long-term structural reforms against the backdrop of economic recovery measures and political instability is of paramount importance. According to the WB, the ability to reduce the impact of the crisis and support the recovery of the Moldovan economy will largely depend on external financing, in particular on successful negotiations on the new IMF program. “Also, going forward, Moldova will need to address the inequality of opportunities and accelerate private sector-driven job creation. Finally, as shown by the severe drought episode in 2020, the economy is highly vulnerable to extreme weather episodes,” the WB experts emphasized. According to the forecast of the World Bank experts, GDP growth in Moldova in 2021 will amount to 3.8%, in 2022 - 3.7%, and in 2023 - 3.8%, and in nominal terms it will amount to 222.2 billion, 241.7 billion and 263.2 billion lei. A gradual 6.6% increase in Moldovan exports is expected in 2021, 7.1% in 2022 and 7.5% in 2023. Imports will also grow in stages: by 5.1% in 2021, by 6.3% - in 2022 and by 6.5% - in 2023. Average annual inflation in Moldova is expected at 4.4% in 2021 and 5% each in 2022-2023. External debt is expected to be 74.6% of GDP in 2021, 74% in 2022, and 73.5% in 2023. Public and publicly guaranteed debt will amount to 41.3% of GDP in 2021, 42.5% in 2022 and 43.6% in 2023.The budget deficit, according to forecasts of the WB experts, will amount to 4% of GDP in 2021, 2.8% in 2022 and 2.5% in 2023. // 20.05.2021 - InfoMarket
