The EBRD lowered its forecast for Moldova's GDP growth in 2022 from 2% to 1%, and for 2023 kept it at 3.5%.
Such data are provided in the new, May review of the regional economy (Regional Economic Update) published by the bank. Experts from the European Bank for Reconstruction and Development note that Moldova's exceptionally strong GDP growth of 13.9% in 2021 was due to double-digit growth in household consumption, which, in turn, was supported by a steady increase in wages, social assistance and remittances, as well as a revival of export demand from European automotive value chains. However, higher food prices since the beginning of 2021 and a threefold increase in gas prices since October 2021 have pushed inflation from almost zero at the beginning of last year to 22.2% year-on-year in March 2022. These events prompted the National Bank of Moldova to increase the base rate from 3.65% per annum in July 2021 to 12.5% in March 2022 and to 15.5% in May 2022. According to EBRD experts, rising gas prices are a serious risk for Moldova. High gas prices contributed to a current account deficit of 11.6% of GDP in 2021, which caused the NBM to intervene in the foreign currency market and thus reduce international reserve assets from $4 billion in October 2021 to $3.4 billion in March 2022, but it still covers approximately five months of imports. Bank analysts point out that energy subsidies to households and businesses are putting pressure on public finances and crowding out public investment. It is emphasized that Moldova's fragile institutions are struggling to cope with the influx of Ukrainian refugees and trade disruptions due to the war in Ukraine. The recent additional rise in energy and grain prices will continue to keep inflation elevated. According to EBRD experts, due to these stresses for the economy this year, GDP growth in Moldova is expected to be only 1%, and next year economic growth is expected to accelerate moderately to 3.5%. In light of the adverse shock to the Moldovan economy, the authorities requested an increase in funding under a new 40-month program that initially provided the country with $558 million under ECF/EFF mechanisms. The program was approved in December 2021. EBRD experts emphasize that international assistance will help Moldova mitigate some of its pressing funding problems, but downside risks due to high inflation and the impact of the war in Ukraine remain significant. Earlier, the InfoMarket agency reported that the IMF would increase assistance to Moldova under the current program by $267 million - up to $815 million. The IMF team reached such an agreement at the staff level with the Moldovan authorities. This agreement must be approved by the IMF Executive Board in May. It should be noted that in the March Regional Economic Update published by the EBRD, the bank lowered its forecast for Moldova's GDP growth in 2022 from 4% to 2%, saying that in 2023 it expects the Moldovan economy to grow by 3.5% In the previous November Regional Economic Prospects in the EBRD Regions, it was stated that the EBRD maintained its economic growth forecast for our country in 2022 at 4%. As InfoMarket agency reported earlier, according to the new, April review of the International Monetary Fund "Prospects for the development of the world economy" (World Economic Outlook, WEO), the IMF lowered the forecast for Moldova's GDP growth in 2022 from 4.5% to 0.3%, and in 2023 - from 5.5% to 2%. Earlier, the Moldovan government also lowered its GDP growth forecast for 2022 from 4.5% to 0.3%. The World Bank has worsened the forecast for Moldova's GDP growth in 2022 and 2023 and expects the Moldovan economy to decline by 0.4% this year, and growth by 2.7% next year. Before the start of the war in Ukraine, the World Bank predicted that in 2022 Moldova's GDP growth would be 3.9%, and in 2023 - 4.4%. According to the National Bureau of Statistics, Moldova's GDP in 2021, according to preliminary data, amounted to 241.9 billion lei and increased by 13.9% compared to 2020. // 10.05.2022 — InfoMarket.
