Ministry of Foreign Affairs and European Integration of the Republic of Moldova

The Embassy of the Republic of Moldova to People’s Republic of China

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Economy

OPERATIVE INFORMATION

on the social-economic evolution of the Republic of Moldova

(according to data available on 31.12.2020)

 

Crisis of pandemic and drought have affected the economy of the Republic of Moldova, with Gross domestic product down by 8.2% in 9 months 2020. Most economic sectors have contributed negatively to the evolution of Gross domestic product, but major influences are noted from the account of domestic trade in wholesale and retail goods (contribution of -2.4 p.p.), agriculture (-2.1 p.p.), industry (-0.9 p.p.), public administration, social insurance, education, health (-0.6 p.p.), professional, scientific and technical activities (-0.5 p.p.) etc. At the same time, restrictive measures imposed in the context of the spread of pandemic have led to a sharp decrease in final consumption, in particular of private consumption, influencing the economic increase by -7.7 p.p. Most companies have diminished their investment activity, being constrained by insufficient financial means and thus gross capital formation has contributed -1.9 p.p. to the evolution of GDP.

The domestic demand had a disinflationary impact and, as a result, in October 2020 there was inflation of only 0.1% compared to December 2019, compared to the inflation rate of 6.6% in the same period of 2019. The annual inflation rate (November 2020 compared to November 2019) was 0.9%, below the limit of the range of variation of the inflation target set by the National Bank of Moldova (5% +/- 1.5%). On 06.11.2020, the NBM took the decision to reduce the base rate from 2.75% to 2.65%.

The leum moldovenesc depreciated against the US dollar and the Euro. Since the beginning of 2020 the national currency has marked a depreciation of 0.2% against the US dollar in nominal terms (from 17.21 lei for 1 U.S. dollar to 01.01.2020 to 17.24 lei to 30.11.2020). Against the Euro the Moldovans depreciated by 6.7%. The stock of the RESERVE currency assets of the NBM on 30.11.2020 reached a historical record of 3680.5 million. 20.5% compared to the level recorded at the end of 2019 and 20.3% compared to 29.11.2019.

The M3 monetary mass at the end of November 2020 amounted to about 103.2 billion. An increase by 17.3% compared to the end of November 2019. The evolution of the M3 monetary mass was driven by the increase of the money in circulation by 25.5%, on spot deposits – by 24.2% and foreign currency deposits – by 15.8%. The demand for credits is decreasing: the volume of new credits granted in January-November 2020 decreased by about 2.4% compared to the period of 2019.

Budgetary revenues shall remain below the previous year's level. The National Public Budget received revenues of about 55.5 billion. JANUARY-November 2020, down 2% from the same period in 2019. At the same time, 9.5% of the expenses were made, amounting to about 63.7 billion. Lei. Thus, the budget deficit reached a new historical high (-8.2 billion lei).

 

The increase in government debt is increasing: since the beginning of the year the government's government's government has increased by 25.7% and reached a level of 66 mild. Lei. Internal state debt amounts to 29.1 billion. and registered an increase of 25.5%. At the same time, the foreign state debt is at a level of about 2.1 billion. US dollars (36.9 billion lei) and increased by 25.6% (by 25.8% - national currency). The crisis of the budget has led to an increase in the need for financing of the budget, and thus, in January-November 2020, there were registered external sources of financing amounting to 485.6 million dollars, compared to $229.6 million in the same period of the previous year.

The negative impact of the COVID-19 pandemic and the associated restrictive measures have been reversed over the balance of payments. The decrease in domestic demand in January-September 2020 has caused the current account deficit to decrease by 1.7 times. In addition, the cessation of economic activity and uncertain prospects for the future have negatively influenced investment activity and thus, during the reference period, capital inputs in the form of foreign direct investments decreased by 20.5 times.

Foreign trade continues to be affected by the pandemic crisis. The reduction of external demand from the main partners of the Republic of Moldova resulted in the decrease of exports, and the decrease in consumption led to the decrease of imports. In January-October 2020 exports decreased by 12.6%, and imports - by 9.9%. The negative balance of trade amounted to about 2.3 billion. US dollars, 7.3% lower than the one recorded in the same period 2019.

Transfers of money from abroad carried out through the banks of individuals of the Republic of Moldova increase the sixth consecutive month. In November, the physical persons transferred from the outside through the moldovan banks 30% more than in November 2019. This substantial increase was probably due to the limitation of the possibilities of remittances in the context of the CoVID-19 pandemic.

The industrial sector remains on a negative trend, still affected by the pandemic crisis, as well as the 2020 drought. In January-October, the volume of industrial production decreased by 6.9%, including by 7.7% in October. The most affected are the exporting and food industry branches: machine-building industry, light industry, processing and preservation of fruit and vegetables, manufacture of beverages, manufacture of other food products.

Unfavourable climatic conditions have led to the essential decrease in the volume of agricultural production. In January-September 2020 it decreased by 25.3%, totalling about 21 billion. Lei. Vegetable production decreased by 35.5% and animal production - by 2.8%. The largest scans were recorded in the following crops: sorghum, sugar beet, soybeans, corn, wheat, sunflowers, rape seed.

The shortage of financial resources and uncertainties created by the pandemic crisis have led to a decrease in investments in fixed assets. In January-September 2020, the volume of investment in fixed assets decreased by 4.4%, totalling about 15 billion. Lei. The most affected by the crisis are investments from the own sources of economic operators (-7%), generating the greatest negative impact on investment activity (-4.6 p.p.). No budgetary investments (-21.3%) were recovered, nor from foreign sources (-8%). At the same time, investments in machinery and machinery (-14.5%), non-residential buildings (-19.9%), land (-33.8%) remain declining. Increased investments in transport (+33.4%), residential buildings (+7%) engineering (+6.2%).

The transport sector is still experiencing negative developments. In January-October 2020 passenger transport decreased by 47.2%, and freight transport – by 13.8%. The closure of the borders and travel restrictions, as well as the restriction of the volume of trade exchanges during the crisis pandemic, were the basic factors that caused these involutions.

Domestic trade in retail goods is increasing, but domestic trade in services remains declining. In January-October 2020, retail trade registered an increase of 2.1% (comparable prices), with other areas of internal trade decreasing: the volume of market services provided to the population – -19% (comparable prices), the volume of services provided to enterprises – -17.8% (current prices), wholesale trade – -7.8% (current prices), trade in motor vehicles – -19.7% (current prices).

The COVID-19 pandemic has produced dramatic effects for the travel industry. In January-September 2020, travel agencies and tour operators provided services to 82.1 thousand tourists and hikers, about 3.9 times less than the same period in 2019, the decrease being caused by the reduction in the number of participants in tourism (5.4 times less), receiving tourism (-56.3%) internal tourism (-23.9%).

The average gross monthly earnings of an employee in the national economy in January-September 2020 amounted to 7850.9 lei and increased by 9.0% compared to January-September 2019. Real pay increased by 4.1%. The foreign currency was about 402 Euros or 452 U.S. dollars. The budgetary sphere monthly average earnings amounted to 7097 lei, increasing by 6.6%, and in the real sector – 8131.4 lei and increased by 9.8% respectively (in nominal terms). 3

The average size of the monthly pension on 01.10.2020 was 2050.18 lei and increased by about 8.0% compared to the same date of 2019 in nominal terms.

The unemployment rate (the share of BIM labour) at the country level in the third quarter of 2020 was 3.4%. The number of unemployed registered at the offices of the labour force in January-November 2020 amounted to about 46,000 people and increased by about 1.7 times compared to January-November 2019.

The size of the standard of existence in the first half of 2020, constituted an average per month for a person 2082.7 lei, an increase compared to the first half of 2019 by 2.7% (in nominal terms).