Moldova needs to expand its industrial sector and improve its business climate to accelerate economic growth to 8-10% per year over the next decade - Dumitru Alaiba
This was announced by the Deputy Prime Minister, Minister of Economic Development and Digitalization of Moldova in an interview with SeeNews. “We have to be bold and that's what we're doing right now. We are pursuing reforms that will unlock much greater growth potential. This is what Moldova needs and I think it is realistic to say that we can achieve this because the base is quite low, there is a lot of room for growth over the next decade, and this is the experience of other countries in the region that have embarked on the path of integration into EU,” added Dumitru Alaiba. He recalled that to accelerate economic growth, the government began a series of administrative and tax reforms. “Last year alone we removed barriers to doing business worth at least 0.5% of GDP, and this year we are pushing for even more ambitious reforms,” said the Deputy Prime Minister, Minister of Economic Development and Digitalization. He also drew attention to the fact that in 2023 Moldova abandoned the taxation of reinvested profits, seeking to encourage companies to expand their business. The authorities also opened their labor market to citizens of 47 countries. “Citizens of the EU or European Free Trade Association (EFTA) countries, as well as the USA, Canada, Western Balkans, Ukraine or the South Caucasus can come to Moldova with a tourist visa, sign an employment contract and start working. This step could bring an additional 1% to GDP," he emphasized. According to Dumitru Alaiba, digitalization is a huge growth factor. "When I took office in June last year, about 38% of government services for entrepreneurs were transferred to digital format. Now this share is already 60% - almost double growth over the year. We are going to reach 75% this year and strive for 100% in the coming years, because this increases productivity and efficiency for every company and for every entrepreneur, small and large and prevents corruption,” emphasized the Deputy Prime Minister, Minister of Economic Development and Digitalization. According to him, the problem that the authorities need to solve is to stimulate the industrial sector. The share of industry in Moldova's GDP has decreased from 40% over the past three decades to 8%. In addition, only 3% of industrial products have high added value and a very modest part of it is exported. To reverse the trend, attract investment and boost exports, the government plans to launch government aid schemes to support SMEs operating in a range of sectors where they have a competitive advantage - electronics, automotive, pharmaceuticals, food processing and energy. “The IT sector is very promising,” said Dumitru Alaiba, noting that more than 60% of Moldova’s GDP comes from information technology. He emphasized that the sector has seen very steady growth of 7-9% per annum over the last decade and will continue to grow because there is still room. To support its IT sector, Moldova has introduced a flat turnover tax of 7%, with no other taxes levied on either the employer or employee. The Deputy Prime Minister, Minister of Economic Development and Digitalization also noted that Moldova needs a clear strategy for the development of the capital market to attract investment and stimulate growth. By the end of the year, the government plans to reform capital market legislation and restructure the stock exchange to facilitate access for private investors. “This is a growth driver, which, as we see, will contribute another 0.5% of GDP,” says Dumitru Alaiba. According to national statistics, Moldova's GDP in 2023, according to preliminary data, amounted to 300.42 billion lei, an increase of 0.7%, compared to 2022. The IMF lowered the forecast for Moldova's GDP growth in 2024 by 1.7 p.p. - from 4.3% to 2.6%, and in 2025 expects economic growth at 4.8%. The Ministry of Economic Development and Digitalization predicts that the Moldovan economy will grow by 2.5% in 2024, and in the next three years, annual GDP growth will be 3%, 3.3% and 3.7%, respectively. The World Bank previously lowered its GDP growth forecast for Moldova in 2024 by 2 percentage points - from 4.2% to 2.2%, and in 2025 - by 0.2 percentage points - 4.1% to 3.9%.// 10.06.2024 — InfoMarket.
