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Johan Mathisen, IMF Resident Representative in Moldova, stressed that the IMF study (“The Impact of the Financial Crisis on Low-Income Countries”) was primarily aimed at the advanced countries' donor community and urged to pay attention to inadmissibility of reducing their financing. Developing economies prove to be more vulnerable to global recession. Moldova was pooled in the study with other low income countries. Since the end of last year IMF experts were actively signaling to Moldovan authorities about the first signs of the impact of global crisis on the national economy. Now this threat is even more visible. Although the country got recently a quite good financial system stability rating, it did not get immunity though from the external impact of the crisis, in the context of a sharp deterioration of the situation in the region as a whole.
 
“A simulation exercise using vulnerability tests by three key indicators for the development of the country (FDIs, exports and remittances) raises concerns, - stated Johan Mathisen. - It is not clear yet, how strong and deep the impact is going to be. We are monitoring risks closely and will start active discussions with government about undertaking necessary measures only after the president's election”.

Also, the IMF Resident Representative said that Moldova, as member country, can count on a special attention from this organization with regard to attracting additional financial resources for balance of payment support into the country. Moldova is in such position that it can draw upon not only concessional lending, but also on other lending instruments that are, on one hand, more expensive, but on the other had allow for higher financing and free access to financial resources as needed; namely, the so-called standby agreements. “During the February IMF mission we did stretch out a helping hand.”

So does Moldova need an anti-crisis plan? Many analysts are sure that the time for taking preventive measure was lost. The influence of world crisis cannot be stopped. The readiness of international financial structures to provide aid at any moment depends on the authorities’ desire to actively influence on the situation with the goal to minimize the consequences for country’s economy. IMF experts say that there are 2 ways of anti-crisis behavior of countries. First – a managed depreciation of nominal exchange rate of the national currency. This is applied by the majority of neighboring countries, aiming to stimulate the domestic production. Second – to increase country’s competitiveness by reducing domestic demand (reducing imports, productions costs, wages, CPI level and lending volumes in the economy). Such a path was chosen by the Baltic States.

From IMF’s experience, as Johan Mathisen said, the second path turns out to be more painful for the economy in general and leads to the deepening of recession. In any case, any method to minimize the risks will be subject of consultations with the country’s authorities, stressed Mr. Mathisen.

To come back to the situation in Moldova, the deflation experienced during several months now is a clear reflection of the commitment to undertake “anti-crisis measures” as per the second scenario. On one hand, active “dollarization” of the economy and supporting the nominal exchange rate of leu should give a positive signal to the enterprises regarding the stability of the financial trend. On the other hand, maintaining high real interest rates for lending on the background of the deflation that we see, as well as shrinkage of volume of lei, are accompanied by an overall reduction of level of business activity, a reduction of demand for credits. Consequently, this may push the enterprises to cut production costs to the maximum, as well as to cut spending associated with labor force. Time will show how long one can balance on the edge of possibilities.

[unofficial translation from Russian]