Boosting private sector investment in key sectors is vital for Moldova's economic growth - World Bank.
This is stated in a new study "Diagnostics of the private sector of Moldova", conducted by experts from the WB and the International Finance Corporation, which is part of the WB group. The document notes that accelerating reforms and stimulating the development of the private sector in key sectors of the economy are necessary to increase the competitiveness and productivity of Moldova. In addition, the country must take a number of measures to address the unprecedented economic problems caused by Russia's invasion of Ukraine. The Moldova Private Sector Diagnostic - the first of its kind in the country - aims to support the government by identifying key barriers to economic growth and sectors that can optimize the potential of the private sector in Moldova. The study recommends reforms to strengthen governance and capital creation, as well as address sector-specific bottlenecks that prevent increased private investment. As noted, Moldova is among the countries most affected by the war in Ukraine. Taking into account a number of factors - high inflation, the influx of refugees, threats to energy security and major disruptions in international trade - the country's GDP in 2022 decreased by 5.9% compared to 2021. According to experts, in this context it is important to unleash the potential of private sectors, introduce new digital technologies, develop sustainable supply chains, and ensure the expansion of exports, especially to the European Union. It is emphasized that support for small and medium-sized enterprises is important. In 2021, SMEs, the cornerstone of the local economy, accounted for 98.4% of all registered businesses, generating 48% of the country's GDP. According to the study, limited access to finance is one of the main barriers for small businesses, with a financing gap of 14% of GDP. However, with a modern credit infrastructure, better access to digital financial services, and a modernized collateral registry, the sector can help the country emerge from the economic crisis. According to IFC Regional Manager for Moldova and Ukraine Lisa Kaestner building a robust private sector and improving access to EU markets will provide opportunities for many sectors, attracting domestic and international investment while ensuring long-term development. With traditional freight routes blocked by Russia's invasion of Ukraine, improving port and road connectivity between Moldova and Romania will be essential. In addition, ensuring the security of trade and supply chains, as well as harmonizing the regulatory framework for trade and logistics with EU standards, will help to diversify exports and improve access to new markets, the study notes. Reducing the dominance of state enterprises will further level the playing field for businesses by attracting more private investment to fund development projects. In some cases, this may include preparing state enterprises for privatization. Given the ongoing disruptions in gas supplies, experts recommend reviewing the country's energy policy to diversify the energy mix, in particular through the use of the potential of solar and wind energy, and develop competitive large-scale projects to attract more private investors. “Given the recent series of ongoing crises, Moldova must find quick and effective ways to recover from the shock and return to the path of reform and development,” said Inguna Dobraja, World Bank Country Manager for Moldova. According to her, in this sense, the first diagnostic of the private sector in Moldova is intended to support the government by identifying the main development constraints and sectors that can unlock the potential of the private sector in Moldova, a key element in this recovery process. The Private Sector Diagnostic in Moldova also identifies other potential sectors - agriculture, information technology and business process outsourcing, as well as shared service centers - that can generate more revenue and stimulate development in Moldova. It is planned that IFC's investment and advisory activities in Moldova, in accordance with the World Bank's Country Partnership Framework, will focus on the sectors and areas of reform identified in the Private Sector Diagnostic. The full version of the Country Private Sector Diagnostic for Moldova can be viewed at the link: https://www.ifc.org/wps/wcm/connect/9a24ea15-5bd7-4478-9c19-297b9c07dce9/CPSD-Moldova-EN.pdf?MOD=AJPERES&ContentCache=none&CVID=ort44.2 // 20.03.2023 — InfoMarket
