{"id":448889,"date":"2020-10-25T13:17:16","date_gmt":"2020-10-25T13:17:16","guid":{"rendered":"https:\/\/www.moldova.org\/en\/?p=448889"},"modified":"2020-10-25T13:25:44","modified_gmt":"2020-10-25T13:25:44","slug":"expert-grup-report-a-deep-economic-decline-caused-by-the-covid-19-pandemic-and-climate-shocks-is-expected-in-moldova","status":"publish","type":"post","link":"https:\/\/www.moldova.org\/en\/expert-grup-report-a-deep-economic-decline-caused-by-the-covid-19-pandemic-and-climate-shocks-is-expected-in-moldova\/","title":{"rendered":"Expert-Grup Report: A deep economic decline caused by the Covid-19 pandemic and climate shocks is expected in Moldova"},"content":{"rendered":"Reading Time: <\/span> 4<\/span> minutes<\/span><\/span>

The Republic of Moldova State of the Country Report<\/a>\u00a0was recently published by the Independent Think-Tank Expert-Grup<\/strong>, in partnership with Friedrich-Ebert-Stiftung Foundation (FES)<\/strong>, presenting several key finding regarding the most important factors that impacted the social and economic state of the country.<\/p>\n

According to the Expert-Grup report, the COVID-19 pandemic caught the Republic of Moldova unprepared<\/span>. “The repercussions of the virus have amplified the underlying vulnerabilities related to the state of the country.”<\/em> Moreover, the agriculture sector from Moldova was challenged by a severe drought, which revealed the country’s vulnerabilities to climate shocks.<\/p>\n

At the beginning of the year, Moldova entered the crisis with an already slowing down economy, an increasingly scanty budget, declining macroeconomic indicators, a lower level of competitiveness (86th position out of 141 states according to the 2019 Global Competitiveness Report<\/em>), as well as a lower position concerning economic freedom (87th position out of 180 states according to the Heritage Foundation 2020 Index of Economic Freedom<\/em>) and a higher level of corruption ((120th position out of 180 states according to the Transparency International 2019 Corruption Perceptions Index<\/em>).<\/p>\n

Vulnerable businesses<\/h3>\n

As the previously mentioned report stated, most companies from Moldova were not prepared for the pandemic crisis. Almost all of them used to have low cash buffers, poor crisis management, a low level of technological endowment, limited capacity to manage digital tools and a minimum of diversification of suppliers and sales channels.<\/span> The least prepared were small and medium sized enterprises (SMEs), which had the disadvantage of lower resilience as compared to big companies.<\/p>\n

“The crisis caused by the Covid-19 pandemic undermined the competitiveness of the private sector because of restricted access to raw materials, market and capital\/financial resources, as well as through the decline in labour productivity.”<\/p><\/blockquote>\n

Leery people<\/h3>\n

The experts concluded that, generally, the quality of the democratic process, the legislative process and public policymaking has deteriorated. The crisis brought by the pandemic “revealed a chronic deficit of public trust in government, along with an inefficient and inadequate anti-crisis response from the executive.”<\/em><\/p>\n

Due to the low trust in government and its decisions, people used to ignore basic personal protection requirements<\/span> – wearing masks and keeping physical distance. That aggravated the pandemic crisis even more.<\/p>\n

According to the Expert-Grup report, Moldovan politicians have captured the policy agenda, while having their priorities limited to electoral cycles.<\/span><\/p>\n

“An eloquent example here is the dominance by politicians or high-ranking officials (the country’s president, the head and some members of the executive) of the role of communicators on the management of the pandemic, despite the fact that none of these officials are experts in health issues or public communication. This has generated public disapproval, further weakening the relationship and trust between citizens and the authorities\/the state.”<\/p><\/blockquote>\n

Poor governance<\/h3>\n

The report’s authors claimed that “the measures to mitigate the economic and social repercussions were neither sufficient nor effective.”<\/em> Except the unemployment benefits for a limited number of people, postponement of tax payments by a few months, a moratorium on state inspections and a mechanism to subsidize loan interest payments of companies facing urgent needs, the Government of the Republic of Moldova could not provide more substantial measures to cover the losses of companies and the country’s population<\/span>, as the report said. That is while, in July 2020 only, the number of unemployed registered with the National Employment Agency<\/strong> increased by 60.7%<\/strong> compared to the previous year.<\/p>\n

“The figures serve as proof: the total intervention was about 0.4-0.5% of GDP, which is about five to six times less than the anti-crisis programs implemented by other states in the region.”<\/p><\/blockquote>\n

Concerning the effects of the drought that hit the Moldovan agriculture this summer, experts stated this was due to neglecting environmental issues in recent years, namely the tendency to sacrifice environmental goals in favour of economic ones or those of a narrow group interests<\/span> – a widely used practice among Moldovan politicians.<\/p>\n

“After several protests, farmers were provided with tax facilities and subsidies in order to compensate the losses incurred because of the drought.” <\/em>However, long-run measures that would increase the resilience of the agricultural sector – modern irrigation systems, reorientation to more drought-resistant crops, intensive agriculture with increased added value, elimination of anti-competitive arrangements among intermediaries – were ignored.<\/p>\n

Expert’s forecasts<\/h3>\n

The Minister of Economy and Infrastructure, Sergiu Railean<\/strong>, declared<\/a> recently that, in the second quarter of 2020, Moldova faced the deepest economic decline in the last 20 years<\/span>, the GDP decreasing by 14%<\/strong> as compared to the second quarter of 2019.<\/p>\n

The projections regarding the Covid-19 pandemic crisis say it will continue during 2021. “The economy is forecasted to shrink by 7.5% in 2020, as a result of two overlapping crises: Covid-19 pandemic and drought, making it a worse crisis when compared to the recession of 2009,”<\/em> said the report. In 2021, the economy of the Republic of Moldova will not manage to recover to the level before the crisis<\/span>, the most affected sectors being agriculture, transport and industrial sectors.<\/p>\n

In the field of services, those associated with human mobility such as tourism, hotels\/restaurants\/cafes, passenger transport, the arts, recreation and leisure activities still will suffer in the coming year. The investment activity and exports will be undermined, while the budged deficit could reach 10%<\/strong> of GDP<\/span>, according to the economic forecasts.<\/p>\n

What’s more, the report stated<\/a> that further medium-and-long-term risks will be generated during the ongoing crisis, such as failure to compete for foreign direct investments, emigration of the working age population, poor integration into international supply chains and globalization\/regionalization processes.<\/p>\n

In this regard, Moldova urgently needs anti- and post-crisis strategies<\/strong> related to identifying more internal and external resources, compensating for the losses suffered by companies and the population, and implementing state programmes targeting a faster digitalisation, trainings for reallocation of the labour force, consulting services for SMEs, easier access to subsidies, grants and state guarantees for loans.<\/p>\n

Photo: NICHOLAS CAPPELLO| Unsplash<\/p>\n","protected":false},"excerpt":{"rendered":"

Reading Time: <\/span> 4<\/span> minutes<\/span><\/span>The Republic of Moldova State of the Country Report\u00a0was recently published by the Independent Think-Tank Expert-Grup, in partnership with Friedrich-Ebert-Stiftung Foundation (FES), presenting several key finding regarding the most important factors that impacted the social and economic state of the country. According to the Expert-Grup report, the COVID-19 pandemic caught the Republic of Moldova unprepared. […]<\/p>\n","protected":false},"author":31,"featured_media":448890,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5,6,3,4,56],"tags":[642,381,894,77,297,895,35,27,124],"class_list":["post-448889","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","category-important-en","category-politics","category-society","category-reportaje","tag-covid-19","tag-crisis","tag-decline","tag-economy","tag-expert","tag-expert-grup","tag-important","tag-moldova","tag-report"],"content_social_share":"Reading Time: <\/span> 4<\/span> minutes<\/span><\/span>

The Republic of Moldova State of the Country Report<\/a>\u00a0was recently published by the Independent Think-Tank Expert-Grup<\/strong>, in partnership with Friedrich-Ebert-Stiftung Foundation (FES)<\/strong>, presenting several key finding regarding the most important factors that impacted the social and economic state of the country.<\/p>\n

According to the Expert-Grup report, the COVID-19 pandemic caught the Republic of Moldova unprepared<\/span>. “The repercussions of the virus have amplified the underlying vulnerabilities related to the state of the country.”<\/em> Moreover, the agriculture sector from Moldova was challenged by a severe drought, which revealed the country’s vulnerabilities to climate shocks.<\/p>\n

At the beginning of the year, Moldova entered the crisis with an already slowing down economy, an increasingly scanty budget, declining macroeconomic indicators, a lower level of competitiveness (86th position out of 141 states according to the 2019 Global Competitiveness Report<\/em>), as well as a lower position concerning economic freedom (87th position out of 180 states according to the Heritage Foundation 2020 Index of Economic Freedom<\/em>) and a higher level of corruption ((120th position out of 180 states according to the Transparency International 2019 Corruption Perceptions Index<\/em>).<\/p>\n

Vulnerable businesses<\/h3>\n

As the previously mentioned report stated, most companies from Moldova were not prepared for the pandemic crisis. Almost all of them used to have low cash buffers, poor crisis management, a low level of technological endowment, limited capacity to manage digital tools and a minimum of diversification of suppliers and sales channels.<\/span> The least prepared were small and medium sized enterprises (SMEs), which had the disadvantage of lower resilience as compared to big companies.<\/p>\n

“The crisis caused by the Covid-19 pandemic undermined the competitiveness of the private sector because of restricted access to raw materials, market and capital\/financial resources, as well as through the decline in labour productivity.”<\/p><\/blockquote>\n

Leery people<\/h3>\n

The experts concluded that, generally, the quality of the democratic process, the legislative process and public policymaking has deteriorated. The crisis brought by the pandemic “revealed a chronic deficit of public trust in government, along with an inefficient and inadequate anti-crisis response from the executive.”<\/em><\/p>\n

Due to the low trust in government and its decisions, people used to ignore basic personal protection requirements<\/span> – wearing masks and keeping physical distance. That aggravated the pandemic crisis even more.<\/p>\n

According to the Expert-Grup report, Moldovan politicians have captured the policy agenda, while having their priorities limited to electoral cycles.<\/span><\/p>\n

“An eloquent example here is the dominance by politicians or high-ranking officials (the country’s president, the head and some members of the executive) of the role of communicators on the management of the pandemic, despite the fact that none of these officials are experts in health issues or public communication. This has generated public disapproval, further weakening the relationship and trust between citizens and the authorities\/the state.”<\/p><\/blockquote>\n

Poor governance<\/h3>\n

The report’s authors claimed that “the measures to mitigate the economic and social repercussions were neither sufficient nor effective.”<\/em> Except the unemployment benefits for a limited number of people, postponement of tax payments by a few months, a moratorium on state inspections and a mechanism to subsidize loan interest payments of companies facing urgent needs, the Government of the Republic of Moldova could not provide more substantial measures to cover the losses of companies and the country’s population<\/span>, as the report said. That is while, in July 2020 only, the number of unemployed registered with the National Employment Agency<\/strong> increased by 60.7%<\/strong> compared to the previous year.<\/p>\n

“The figures serve as proof: the total intervention was about 0.4-0.5% of GDP, which is about five to six times less than the anti-crisis programs implemented by other states in the region.”<\/p><\/blockquote>\n

Concerning the effects of the drought that hit the Moldovan agriculture this summer, experts stated this was due to neglecting environmental issues in recent years, namely the tendency to sacrifice environmental goals in favour of economic ones or those of a narrow group interests<\/span> – a widely used practice among Moldovan politicians.<\/p>\n

“After several protests, farmers were provided with tax facilities and subsidies in order to compensate the losses incurred because of the drought.” <\/em>However, long-run measures that would increase the resilience of the agricultural sector – modern irrigation systems, reorientation to more drought-resistant crops, intensive agriculture with increased added value, elimination of anti-competitive arrangements among intermediaries – were ignored.<\/p>\n

Expert’s forecasts<\/h3>\n

The Minister of Economy and Infrastructure, Sergiu Railean<\/strong>, declared<\/a> recently that, in the second quarter of 2020, Moldova faced the deepest economic decline in the last 20 years<\/span>, the GDP decreasing by 14%<\/strong> as compared to the second quarter of 2019.<\/p>\n

The projections regarding the Covid-19 pandemic crisis say it will continue during 2021. “The economy is forecasted to shrink by 7.5% in 2020, as a result of two overlapping crises: Covid-19 pandemic and drought, making it a worse crisis when compared to the recession of 2009,”<\/em> said the report. In 2021, the economy of the Republic of Moldova will not manage to recover to the level before the crisis<\/span>, the most affected sectors being agriculture, transport and industrial sectors.<\/p>\n

In the field of services, those associated with human mobility such as tourism, hotels\/restaurants\/cafes, passenger transport, the arts, recreation and leisure activities still will suffer in the coming year. The investment activity and exports will be undermined, while the budged deficit could reach 10%<\/strong> of GDP<\/span>, according to the economic forecasts.<\/p>\n

What’s more, the report stated<\/a> that further medium-and-long-term risks will be generated during the ongoing crisis, such as failure to compete for foreign direct investments, emigration of the working age population, poor integration into international supply chains and globalization\/regionalization processes.<\/p>\n

In this regard, Moldova urgently needs anti- and post-crisis strategies<\/strong> related to identifying more internal and external resources, compensating for the losses suffered by companies and the population, and implementing state programmes targeting a faster digitalisation, trainings for reallocation of the labour force, consulting services for SMEs, easier access to subsidies, grants and state guarantees for loans.<\/p>\n

Photo: NICHOLAS CAPPELLO| Unsplash<\/p>\n

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