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 FORMATION
on the social-economic evolution of the Republic of Moldova (according to the data available on 31.01.2020)

Gross domestic product increased by 4.8%, amounting to 155.2 million Lei in first 9 months of 2019. The construction activity had the greatest influence on economic growth, providing 35% of GDP growth, after which 'Wholesale and retail trade, transport and storage, hotels and restaurants' contributed 25%; "Industry" produced 12% of growth, "Information and communications" 9% and Agriculture 6%, respectively. These activities were most influential between January and September of the current year. Rising prices are increasing.

The annual inflation rate (as of December 2019 compared to December 2018) amounted to 7.5%, compared with the inflation rate of 0.9% recorded in the same period of the previous year. The annual inflation rate (7.5%) exceeded the top limit of the NBM inflation target variation range (5% +/-1.5%). The average annual inflation rate was 4.8%.

The Moldovan Lei depreciated slightly against US dollars. A t the beginning of 2019 the national currency marked a depreciation of 0.4% against the US dollar in nominal terms (from 17.14 lei for 1 US dollar as of January 1st 2019 to 17.21 lei for one US dollar as of December 31st, 2019). Against the Romanian Euro, it was appreciated by 1.3%. The NBM's foreign exchange reserve as of December 31st, 2019 reached a historic record of 3.0596 million dollars, increasing by 3% compared to the level recorded at the end of 2018.

The M3 monetary mass at the end of December 2019 amounted to about 89.9 million lei, an increase of 8.2% compared to the end of December 2018.The evolution of m3 monetary mass was mainly due to the increase in money in circulation by 8.9%, including volume of spot deposits by 8.8% and foreign currency deposits by 8%. The credit situation is improving: the volume of new loans granted in 2019 increased by about 17.5% compared to that period of 2018.

The year of 2019 ended with a budget deficit of about 3 million Lei. From January to December 2019, revenues amounted to about 62.9 million Lei (8.5% more than the same period of 2018) with the expenditures of about 66 million Lei (10.7%). Most of the expenditure is incurred for social protection, but the smallest is for environmental protection. The national public budget resulted in a deficit of 3022.7 million Lei, as opposed to 2018 when the budget ended with a deficit of 1581 million Lei.

The total amount of government debt as of December 31, 2019 amounted to about 52.5 million Lei, 0.9% up from the same date of 2018.Domestic state debt reached 23.2 million Lei, registering an increase of 0.5%. The foreign state debt amounted to about 1.7 million US dollars (29.3 million Lei), 0.9% up (up by 1.3% -expressed in lei). The country's indebtedness is below the risk index stipulated in the Medium-Term State Debt Management Programme (2019-2021).

The degree of dependence of the international economy remains high. According to the Balance of Payments preliminary data for 9 months in 2019, the current account deficit constituted 10.6% of GDP, transfers of individuals (labour compensation and personal transfers) 15.9%, the net accumulation of foreign indirect investment liabilities 5.9%, negative balance of goods and services 24.6%.

The downward dynamics of the growth rates of foreign trade continue. In January-November period of 2019, exports increased by 3%, and imports increased by 1.2%. The negative balance of the trade amounted to 2740.9 million US dollars, compared to 2753.4 million dollars in same period of 2018. The coverage of imports versus exports amounted to 48.3%, higher by 0.8 percentage than that recorded in the same period of 2018.

Compared to the similar period of 2018, remittances of money by individuals abroad are on a continuingly downward trend. In 2019 the total volume of individual foreign transfers carried out through banks in the Republic of Moldova decreased by 3.5% and amounted to 1222.9 million US dollars. The decrease was generally caused by the stagnation of the Russian Federation economy (the country from which most of the remittances originate), the contracting of domestic demand in Italy and the economic downturn in Turkey.

The industrial sector is slowly growing. In January-November period of 2019, there was an increase in the volume of industrial production by 2.5%. The increase was determined by the increase in the manufacturing industry (+3.4%). Energy production and supply was in decline (-2.4%), being influenced by the high thermal regime. A negative result was also recorded by the extractive industry (-1.8%). The main factors that led to the growth of the industrial sector were: the development of the automotive sector, the positive developments in the construction and food industry sectors. At the same time, tempering external demand was the underlying factor that slowed the growth rates of the industrial sector.

Investment activity is on the rise. From January to September of 2019, the investment increased in real terms by 15.6%, compared to the same period of the previous year, amounting to about 15.8 million Lei. The intensification of investment activity was due to increased private investment, investments from external appropriations, budgetary investments as well as foreign sources.

The volume of the goods transported records negative developments. In January-November of period 2019, about 17.4 million tons of goods were transported, 3% less. In particular, the volume of goods transported by rail decreased (-12.2%). The volume of air transportation increased by 22%, while the shipping transportation increased by 1.1%. The volume equivalent to the one of previous year was transported by road.

The inland trade of goods and services is increasing, which demonstrates an increase in consumption by the population and economic agents. In the January-November period of 2019, turnover in retail increased by 13.7% compared to the previous year and the volume of turnover in market services provided to the population by 15.1%.

The average gross monthly earnings of an employee in 9 months of 2019 amounted to 7,203.9 Lei, increasing in nominal terms by 15% compared to 9 months of 2018. In real terms, the salary increased by 10.5%. Expressed in foreign currency, it amounted to about 364 Euros or 409 US dollars. In the budgetary sphere, the average monthly earnings amounted to 6,660.4 Lei, increasing by 20.4%, and in the real sector, 7,408 Lei and increased by 13.1% and (in nominal terms). Increasing wages stimulates the increase in domestic demand and, as a result, short-term economic growth, but at the same time creates inflationary pressures.

The average size of the monthly pension as of January 1st, 2020 is 1,901.14 Lei, an increase of 11.2% compared to the same date of 2019 in nominal terms. The minimum monthly amount for the first half of 2019 was 2,028.3 Lei per capita.

The unemployment rate at country level was 4% in the third quarter of 2019. About 31,500 unemployed people were registered at labor offices in 2019, down 11.4% from the number recorded in January-November 2018.