EBRD forecast Moldova's economic growth in 2020 to 4%

The European Bank for Reconstruction and Development (EBRD) said on Wednesday it has increased its forecast for Moldova's economic growth in 2019 to 3.8% from 3.5% projected in May.

For 2020, the EBRD has lifted its forecast for Moldova's economic expansion to 4.0% from 3.8%, the bank said in its November 2019 Regional Economic Prospects report, quoted seenews.

Moldova's gross domestic product (GDP) growth accelerated to 5.2% year-on-year in the first half of 2019, from 4.0% in 2018.

During the first half of the year, the broad-based growth on the production side was led by construction, while agriculture was the only major sector with negative dynamics, the bank said. Also, fixed capital investments, growing at 20.3%, remained the main driver to economic growth on the expenditure side.

The growth of household consumption decelerated to just 1.8% year on year during January-June.

"The current account deficit has widened amid a slight increase in the trade deficit, an improving primary income surplus and a declining surplus of secondary income. A large part of the deficit has been financed by increased FDI inflows and, to a lesser extent, by debt financing," the EBRD said. 

Annual inflation slowed to 0.9% in December 2018, but then accelerated to 6.3% in September 2019, driven by rising regulated prices and imported-food prices, prompting the central bank to react by raising the main policy rate twice, in June and July, from 6.5 to 7.5%.

The EBRD concluded that International Monetary Fund (IMF) support remains crucial for anchoring the macroeconomic stability of Moldova.

After disagreements between the IMF and the previous government, staff-level agreement on the fourth and fifth reviews of the current programme was reached in July 2019, subsequently resulting in the allocation of a new $46.1 million (41 million euro) tranche, the EBRD said.

In October, the economy ministry lifted its forecast for Moldova's 2019 economic growth to 4.2%, from 3.7% predicted in July.

Also in October, the World Bank maintained its April forecast for the growth of the Moldovan economy in the current year at 3.4% and the IMF kept its forecast for Moldova’s GDP growth at 3.5%.

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