Economies around the world have been seriously affected by the financial
crisis and slump in activity. The advanced economies experienced an
unprecedented 6 percent decline in real GDP in the fourth quarter of 2008,
and most are now undergoing deep recessions. Emerging economies too are
suffering badly and contracted 4 percent in the fourth quarter in the
aggregate. The damage is being inflicted through both financial and trade
channels, particularly to east Asian countries that rely heavily on
manufacturing exports and the emerging European and Commonwealth of
Independent States (CIS) economies, which have depended on strong capital
inflows to fuel growth.
The Moldovan economy has been severely impacted as well and will likely
contract by at least 5 percent in real terms this year. Exports have dropped
by more than 20 percent, remittances by more than 30 percent, and FDI has
been cutback sharply due to the slump in economic activity in neighboring
countries. Domestic demand fuelled by remittances seems likely to decrease
further later this year as seasonal demand for labor in the region will
likely be low.
The timing and speed of recovery is uncertain. The economy in the region
is expected to only gradually recover in 2010. For Moldova, the pace of
recovery will ultimately depend on the implementation of strong adjustment
measures and consistent policies to maintain macroeconomic stability.
The IMF stands ready to support Moldova to overcome the current crisis.
An IMF team will arrive this week to take stock of the macroeconomic
situation and start discussions with the interim administration. If the
discussions are productive, the team would return to finalize negotiations
when the new government is in place.