The World Bank (WB) forecasts a GDP growth of 0.5% in Moldova in 2016. According to WB experts, the growth rate of the Moldovan economy is expected to recover during the next two years. The conclusions were presented in an event held to launch the Economic Update for Europe and Central Asia and for Moldova on April 7, IPN reports.
World Bank Country Manager for Moldova Alexander Kremer said the economy is projected to remain subdued in 2016, with growth of 0.5 percent. Net exports are expected to be the main growth driver given the exchange rate adjustment and tighter domestic demand policies. Prolonged low remittances and higher costs of domestic financing, coupled with lack of investor confidence after the fraud in the banking system, will constrain domestic absorption.
The budget deficit is expected to increase to 3.2 percent of GDP in 2016. Accordingly, poverty is expected to decline only modestly in 2016, by less than one percentage point. Remittances are likely to remain at lower levels, inflationary pressures remain and a recovery in labor markets is not expected in the short term. Although fiscal policies have protected social payments, the overall limited fiscal capacity could affect households through other fronts. Poverty is expected to stand at 41 percent in 2016.
According to Alexander Kremer, it will be harder to convince the investors that Moldova is an attractive destination for investments and implementation of projects. As the economy stabilizes and investor confidence improves, Moldova is expected slowly to regain its growth momentum, reaching its potential growth rate in 2017-2018.
The WB experts consider Moldova has limited macroeconomic buffers and needs to deal with major governance issues. It faces a need for fiscal consolidation to maintain fiscal sustainability, while protecting the less well-off.
