0. Moldova’s Economy and IMF Program
Tokhir Mirzoev, IMF Resident Representative
February 2013
Title Page

1. Outline
Economic background
Outlook
IMF program

2. The economy is near-standstill…
Decline in activity since Q3 2011… In 9 months of 2012 GDP declined by 0.2% vs 9 months of Key factors: eurozone + drought
(cumulative quarters , growth over the same period of prev. year, percent)
(twelve-month growth rates, percent)

3. External trade has declined as well…
Both exports and imports are dropping since Summer of 2011, reflecting adverse conditions both domestically and externally
(twelve-month growth rates, percent)

4. (year-on-year growth rates, percent)
Remittances grew 2.8% in 2012 but remain volatile; budget revenues held up.
(year-on-year growth rates, percent)

5. Growth in the financial sector shows signs of peaking amid elevated NPLs
Credit growth remains surprisingly resilient, but banks’ NPL ratios have been on the rise since end-2011 (although spike in NPLs is largely due to BEM and reclassification)…

6. Amid low inflation and demand, bank interest spreads have narrowed
Both MDL and FX bank interest spreads have been dropping while slowing domestic demand kept inflation low
(Percent)

7. Past history points to good reasons to expect strong rebound in agriculture.
Agriculture and GDP Growth,
(percent from previous year)

8. Outlook Growth looks to rebound on account of agriculture
Inflation in line with forecast
Fiscal performance will require an effort with BEM posing additional but manageable (one-off) risk
Current account deficit could widen as demand recovers
But significant downside risks still remain, especially due to external factors and the political uncertainty
2010
2011
2012
2013 proj.
GDP growth
7.1
6.7
-0.6
4.0
Inflation, end year
8.1
7.8
4.1
5.0
Current account balance (% of GDP)
-9.8
-12.6
-9.5
-9.9
Fiscal balance
(% of GDP)
-2.5
-2.4
-2.1
-1.5

9. IMF-supported Program
Last program review remains to be completed (disbursement of remaining USD 77 million).
Mission was postponed twice and program was extended till end-April.
Completion of the program depends on the authorities’ resolute actions to stabilize BEM and willingness to maintain responsible fiscal policies

10. Looking ahead: key policy issues
Banca de Economii
A systemic bank for several reasons
Urgent need for recapitalization
Management needs to be strengthened
In the medium-term, bank should be privatized
Budget 2013 needs revision; many supporting policies were put in place (vignette, fuel excises)
but there are worrying signs of populist initiatives
Monetary policy should maintain low and stable inflation
Structural reforms:
Education, energy sector, financial sector, privatization

11. Thank You!