Moldova

Politics:

• Analysis

  Moldova politics: Quick View - Government resigns after a no-confidence vot

  Event

  The centre-right coalition government of the Alliance for European Integration (AEI) resigned on March 8th, after a vote of no-confidence was passed in parliament a few days earlier.

  Analysis

  The motion received 54 votes in the 101-seat legislature. It had been put forward by the opposition Party of Communists of the Republic of Moldova (PCRM), but was supported by members of parliament (MPs) from the Democratic Party (DP)-which is itself a member of the AEI-and by some independent deputies. The cause of dissension within the ranks of the AEI had been a series of attempts by the DP and the Liberal Democratic Party (LDP) in early 2013 to remove one another's representatives from leading state posts. The president, Nicolae Timofti, now has two chances to select a candidate for prime minister, who must then put together a cabinet for approval by parliament. If this process fails twice, parliament must be dissolved and new elections held.

  A key question is whether, following high levels of animosity between their leaders in recent months, the constituent parties of the AEI will be able to come to a compromise agreement that will allow them to press ahead with their agenda for European integration. EU leaders, keen to achieve at least one clear success for their Eastern Partnership project, have been frantically urging Moldovan politicians to keep calm and think of the gains for the country of signing an EU association agreement at the summit planned for the end of 2013. However, with the leader of the Liberal Party (LP), the third group in the AEI, saying that it would vote with the communists against the president were he again to propose the LDP leader, Vlad Filat, as prime minister, a positive answer looks a little difficult at the moment.

  A second concern might be that, with the economy crashing back into recession from late 2012, the appeal of the CPRM, much weakened following defections from its ranks in late 2011, might return to power. To shore up its vote among pro-Russian voters, the CPRM has been pushing for the country to join the Russian-dominated customs union rather than the EU.

  March 12, 2013

• Background

  Moldova: Key figures

  Vladimir Voronin

  Mr Voronin has dominated the Moldovan political scene since his election as president in 2001. He successfully rebuilt the Party of Communists of the Republic of Moldova (PCRM) after it was relegalised in 1993, and took it to a large enough victory in the parliamentary election in 2001 to govern without coalition partners. In April 2001 parliament elected him to the presidency. Mr Voronin has faced down the challenge posed by hardliners within his own party, and moved the party closer to the political centre. Re-elected to a second term in April 2005, Mr Voronin has continued to espouse a far more pro-EU line than when he first came to office, and has continued to exercise considerable personal political control over the government. He will relinquish the presidency at the end of his second term in April 2009, but may maintain his dominance of Moldovan politics as the leader of the PCRM, and potentially as parliamentary speaker.

  Zinaida Greceanii

  The appointment in March 2008 of the reformist Ms Greceanii as prime minister has helped to ensure that the policy framework remains sound ahead of the parliamentary election due in 2009. In her previous role as first deputy prime minister in 2005-08, Ms Greceanii was instrumental in ensuring good relations with multilateral institutions and in formulating the National Development Strategy for 2008-11. She formerly worked in the Ministry of Finance, including as finance minister in 2002-05. Ms Greceanii is a potential contender for the presidency when Mr Voronin stands down in 2009.

  Dorin Chirtoaca

  Mr Chirtoaca was elected mayor of the capital, Chisinau, in July 2007. He is also deputy chairman of the opposition Liberal Party (LP), which is headed by his uncle, Mihai Ghimpu. Although young and inexperienced when elected mayor of Chisinau, Mr Chirtoaca is a charismatic and fairly skilled politician. He is seen as a serious threat by the PCRM, which managed to engineer a realignment on Chisinau city council in June 2008 that deprived Mr Chirtoaca of his majority on the council, constraining his freedom of action as mayor. Nevertheless, Mr Chirtoaca's strongly anti-communist, anti-corruption platform could boost the LP's performance at the parliamentary election in 2009. However, his frequent meetings with the president of Romania, Traian Basescu, have led to suspicions that he favours Moldovan unification with Romania, a position that appeals to only a narrow segment of the electorate.

  November 04, 2008

• Structure

  Moldova: Political structure

  Official name

  Republic of Moldova

  Legal system

  Moldova adopted a new constitution on July 28th 1994. The Transdniestr region has declared independence, which the central government has not recognised. The region inhabited by the Gagauz minority was granted special legal status in December 1994

  National legislature

  Parliament, a unicameral assembly with 101 members, directly elected by proportional representation

  National elections

  November 28th 2010 (legislative). Next parliamentary election due in 2014. The president is elected by parliament

  Head of state

  President. Nicolae Timofti was elected on March 16th 2012

  National government

  Constitutional amendments introduced in July 2000 diminished the role of the presidency and increased the powers of the government and parliament. The three non-communist parties combined as the Alliance for European Integration (AEI) and formed a government on January 14th 2011, following the parliamentary election in November 2010

  Main political parties

  Four parties won seats in the parliamentary election on November 28th 2010: the Party of Communists of the Republic of Moldova (PCRM; 42), the Liberal Democratic Party (LDP; 32), the Democratic Party (DP; 15) and the Liberal Party (LP; 12)

  Council of ministers

  Prime minister: Vlad Filat (LDP)

  Deputy prime minister & minister of foreign affairs & European Integration: Iurie Leanca (LDP)

  Deputy prime minister in charge of reintegration: Eugen Carpov (independent)

  Deputy prime minister & minister of economy & trade: Valeriu Lazar (DP)

  Deputy prime minister in charge of social issues: Mihai Moldovanu (LP)

  Key ministers

  Agriculture & food industry: Vasile Bumacov (LDP)

  Construction & regional development: Marcel Raducan (DP)

  Culture: Boris Focsa (DP)

  Defence: Vitalie Marinuta (LP)

  Education: Mihai Sleahtitchi (LDP)

  Environment: Gheorghe Salaru (LP)

  Finance: Veaceslav Negruta (LDP)

  Health: Andrei Usatai (LDP)

  Information technology & communications: Pavel Filip (DP)

  Interior: Alexei Roibu (LDP)

  Justice: Alexandru Tanase (LDP)

  Labour, social protection & family: Valentina Buliga (DP)

  Transport & road infrastructure: Anatol Salaru (LP)

  Youth & sports: Ion Cebanu (LP)

  Central bank governor

  Dorin Dragutan

  January 07, 2013

• Outlook

  Moldova: Key developments

  Outlook for 2013-17

  • The election in March 2012 of a new president, Nicolae Timofti, has made way for a degree of political normalisation and some progress on international issues.
  • EU integration will remain an overarching policy goal, but Russia's run-in with the EU on energy policy will continue to complicate this.
  • The Economist Intelligence Unit forecasts a return to moderate economic growth in 2013. This should enable some fiscal consolidation, and pursuit of EU integration will encourage fiscal prudence.
  • Real GDP growth suffered a steep slowdown in 2012 to an estimated 0.5%. A modest pick-up in 2013 will be aided by low base periods for industry and agriculture. We forecast average annual GDP growth of 3.3% in 2013-17.
  • Following substantial disinflation in 2012, inflation could come down further in 2013, owing to lower fuel prices. In 2014-17 modest inflationary pressures will return.
  • We estimate that the current-account deficit widened a little in 2012, owing to poor export growth, high fuel costs and a late boost to imports. The deficit will contract from 2013 as exports and remittances pick up again.

  Review

  • In October Russia's deputy prime minister said that his country would set up consulates in Transdniestr-in effect, edging towards treating it as a separate state-unless the Moldovan government paid its US$3bn gas debt to Russia.
  • In late November José Manuel Barroso became the first president of the European Commission to visit Moldova.
  • In late 2012 the IMF deferred the sixth and final review of economic performance under its lending programme until early 2013, to give the authorities more time to adjust to a steep economic downturn.
  • In early November parliament passed the 2013 budget, with the deficit target set at 1.1% of GDP.
  • In January-September agricultural output was down by more than 20% year on year and industrial production fell by 1.6% year on year.
  • Headline inflation began to slow again in the fourth quarter of 2012, with the year-on-year rate dropping back to 3.9% in October and 3.7% in November.
  • The current-account deficit narrowed during the first half of 2012, as imports began to contract, investment outflows to diminish and employee compensation to rise.

  January 07, 2013

Economy:

• Background

  Moldova: Economic background

  Real gross domestic product by sector
  (% share of GDP)
  	2003	2004	2005	2006	2007
  Agriculture	21.5	21.3	21.7	21.5	17.8
  Industry	24.3	24.4	23.8	22.0	21.7
  Services	54.3	54.3	54.5	56.5	60.5
  Source: Economist Intelligence Unit.

  Download text file (csv format)

  November 04, 2008

• Structure

  Moldova: Economic structure

  Data and charts: Annual trends charts

  
  

  

  January 07, 2013

• Outlook

  Moldova: Country outlook

  Moldova: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: In March 2012 parliament elected a president, Nicolae Timofti, after almost two and a half years with an acting one. This has cleared the way for some political normalisation and greater coherence on international issues. The long delay was caused by a hardening of divisions after a resurgence of political turmoil in 2009, which made it difficult to meet the constitutional stipulations on choosing a head of state. Progress was also hampered by rivalry between party leaders in the reconstituted Alliance for European Integration (AEI) coalition, which came to power after the November 2010 parliamentary election. Mr Timofti is firmly behind the AEI's Westernising agenda. This is helping to repair Moldova's international image. However, it has at times remained difficult for AEI leaders to present a united front. The return to parliament of the Party of Communists of the Republic of Moldova (PCRM) in June 2012 may have reduced the chances of political disruption in the short term. However, a law that bans the public use of communist symbols, which came into effect in October, has caused a new political controversy. With the government continuing to pursue fiscal tightening, and with economic growth having slowed markedly, the risk of social unrest is rising.

  ELECTION WATCH: Mr Timofti was backed by 62 of the 101 parliamentarians, including four independents, thus exceeding the three-fifths majority laid down in the constitution. The next parliamentary election is scheduled for 2014. Although the return of the PCRM to the legislature makes an early election less likely than before, frictions within the government coalition continue to rumble on. In early June 2012 Mr Filat threatened an early poll as a way of advancing the government's programme.

  INTERNATIONAL RELATIONS: Relations with Russia improved for most of 2011-12, owing to Russian efforts to facilitate a resolution of the Transdniestr issue. In mid-October 2011 Moldova signed a free-trade agreement with Russia. The improvement in ties led to the removal of Russian restrictions on Moldovan wine exports and a small discount on the price of gas in 2012. However, in mid-September 2012 a blunt ultimatum from the Russian energy minister, Aleksandr Novak, over the crucial issues of gas prices and debt has put the Moldovan government in an awkward position. An attempt to compromise by postponing energy integration with the EU until 2020 has yet to meet with a positive response from Russia.

  POLICY TRENDS: The euro zone recession in 2012 continues to have a strong impact on Moldova. Amid a slowdown in revenue growth, plans for narrowing the budget deficit have had to be revised. Interest rates have come down sharply in response to a shock to external demand and slowing inflation. Bank stability remains a crucial issue, and the need to address shortcomings in the banking sector was one reason for the IMF's deferral in late 2012 of the final review of economic performance under its lending programme until early 2013. However, Moldova's banks are less dependent than institutions elsewhere in the region on external borrowing and so far the banking system has not suffered from low liquidity.

  ECONOMIC GROWTH: Real grew by just 0.8% year on year in the first half of 2012, down from 7.6% growth in January-June 2011. Since then, the performance of agriculture and industry has worsened. In January-September 2012 agricultural output was down by more than 20% year on year, affected by bad weather. In the same period, industrial production fell by 1.6% year on year, reflecting external weakening. The government has continued to struggle to limit the overshoot of its revised fiscal target. This suggests that year-on-year economic growth is likely to have turned negative in the third quarter. Nevertheless, amid the deepening gloom, growth in remittances appears to have accelerated in July-September, linked to the continuing expansion of the Russian economy. This is likely to have sustained consumption demand growth into the fourth quarter-as implied by the return to year-on-year import growth in October. For this reason, the Economist Intelligence Unit still expects some economic expansion in 2012, although it retains its estimate for a dramatic slowdown to growth of around 0.5%. Continued growth in Russia, the delayed impact of monetary loosening, the restoration of some export competitiveness-as well as low starting-points for agriculture and industry, owing to contraction in 2012-will support an acceleration in Moldova's economic growth to around 2.8% in 2013. In 2014-17 a faster rise in remittances and a slow improvement in the labour market will boost growth further. However, as the medium-term growth outlook for western Europe is modest, we forecast average annual GDP growth in Moldova of around 3.4% in 2014-17, well below the rates before the financial crisis of 2008-09.

  INFLATION: Average consumer price inflation was 7.6% in 2011, only a little faster than in 2010. Month-on-month inflation had been substantially below the medium-term average since December 2011. In June 2012 the year-on-year rate fell to 3.7%, reflecting falling commodity prices and economic slowdown. However, in the third quarter, inflation picked up, driven by higher food prices, as a result of a drought that has affected the region. Currency depreciation and the impact of earlier monetary easing may also have had an effect. In the fourth quarter, headline inflation began to slow again, dropping back to 3.9% year on year in October and to 3.7% in November. The latest slowdown in inflation may be linked to an increasing deceleration of domestic demand growth. The appreciation of the leu against the US dollar from mid-August until late October may also have helped to rein in inflationary pressure. We estimate average inflation in 2012 at 4.6%, well within the government's 3.5-6.5% target range.

  EXCHANGE RATES: After weakening against the US dollar from early May until mid-August, the leu appreciated in August and September, and climbed to Lei12.17:US$1 in late October. This reflected the weakening of the US dollar on international markets. After a further bout of depreciation in November, the leu regained some strength in December, reaching Lei12.2:US$1 in the middle of the month. Despite these oscillations, the underlying trend remains downward, owing to weak exports and remittance inflows, low domestic interest rates and the rapid deterioration in the performance of the economy. In the final years of the forecast period, however, the leu, along with other emerging-market currencies, could be boosted as global investor risk aversion subsides.

  EXTERNAL SECTOR: The current-account deficit widened to 11.1% of GDP in 2011, from 7.7% of GDP in 2010, mainly because of an expansion in the trade deficit. As external conditions continued to weaken in the first quarter of 2012, the current-account deficit widened again. However, in the first half of the year the trade gap was roughly the same as in January-June 2011, at around US$1.4bn, and the current-account deficit narrowed as imports began to contract, investment outflows to diminish and employee compensation to rise. Although there may have been a further narrowing of the quarterly deficit in July-September, the current account is expected to have deteriorated again in the fourth quarter as an earlier acceleration in remittance inflows began to boost import growth. From 2013 an initially weak external recovery and modest currency depreciation will begin to narrow the deficit as export and remittance growth begins to recover. We estimate that the share of the current-account deficit covered by foreign direct investment (FDI) inflows fell to around 25% in 2012. However, FDI should begin to recover during the forecast period as external conditions improve. As the recovery in domestic demand picks up over the forecast period, this will boost import growth. The performance of Moldova's main export partners will remain fairly weak and so we expect growth in imports to outpace that of exports, leading to a widening of the trade deficit in 2013-17.

  January 07, 2013

• Forecast

  Moldova: 5-year forecast summary

  Outlook for 2012-16: Forecast summary

  Forecast summary
  (% unless otherwise indicated)
  	2011a	2012b	2013b	2014b	2015b	2016b
  Real GDP growth	6.4c	1.5	2.7	3.3	3.6	3.8
  Industrial production growth	7.4	-1.0	3.0	3.5	4.0	4.5
  Agricultural production growth	5.5	2.3	2.3	2.5	2.5	2.5
  Consumer price inflation (av)	7.6	4.0	5.1	6.7	6.5	7.0
  Consumer price inflation (end-period)	7.8	3.2	6.1	6.7	6.5	7.2
  Lending rate (av)	14.4c	12.5	13.0	13.0	14.0	14.0
  Deposit rate (av)	7.6c	6.5	8.0	8.0	8.5	8.5
  Consolidated government balance (% of GDP)	-2.4c	-2.2	-1.5	-1.3	-1.1	-1.0
  Exports of goods fob (US$ m)	2,282	2,420	2,730	3,000	3,220	3,520
  Imports of goods fob (US$ m)	-5,147	-5,400	-5,670	-6,000	-6,380	-6,850
  Current-account balance (US$ m)	-802	-936	-669	-473	-381	-331
  Current-account balance (% of GDP)	-11.3c	-12.9	-9.1	-6.0	-4.3	-3.7
  External debt (year-end; US$ m)	4,956c	5,160	5,375	5,609	5,842	6,114
  Exchange rate Lei:US$ (av)	11.74	12.14	12.93	13.40	13.76	13.67
  Exchange rate Lei:US$ (end-period)	11.79	12.60	13.20	13.56	13.92	13.65
  Exchange rate Lei:€ (av)	16.34	15.57	16.32	16.78	17.02	17.22
  Exchange rate Lei:Rb (av)	0.399	0.411	0.428	0.442	0.455	0.462
  a Actual. b Economist Intelligence Unit forecasts. c Economist Intelligence Unit estimates.

  Download the numbers in Excel

  Download text file (csv format)

  July 12, 2012

View detailed map

Country Briefing

Land area

33,700 sq km

Population

3.56m (excluding Transdniestr; end-2010)

Main towns

Population in '000:

 Chisinau (capital): 665

 Tiraspol: 148

 Balti: 144

 Teghina: 93

Climate

Continental

Languages

Moldovan, a dialect of Romanian and the only Romance language in the former Soviet Union. Between 1941 and 1989 it was written in the Cyrillic alphabet, which is still used in the separatist region of Transdniestr. Russian is also widely spoken

Weights and measures

Metric system

Currency

Moldovan leu (plural lei), introduced in November 1993 to replace the interim currency, the ban, at the rate of 1 leu = 100 bani

Time

Two hours ahead of GMT (three hours in Transdniestr)

Fiscal year

Calendar year

Public holidays

January 1st (New Year's Day), January 2nd (New Year holiday), January 7th-8th (Orthodox Christmas), March 8th (International Women's Day), April 15th-16th (Orthodox Easter), May 1st (Labour Day), May 2nd (Memory/Parents' Day), May 9th (Victory Day), August 27th (Independence Day), August 31st (National Language Day)

January 07, 2013