Economy of Moldova

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Moldova is one of the smallest, poorest and heavily indebted transition countries. The transition process in this country was extremely difficult and painful and its pace was uneven. The first stage of economic transformation was initiated in 1990. Liberalization of prices, of trade and enterprise operations were all introduced before 1992. An even more comprehensive program of transformation and stabilization was introduced in cooperation with the IMF and the World Bank in 1993.

The new Constitution (July, 1994) stated that Moldova was “a market economy”. Moldova was admitted to the Council of Europe, and to sign a Partnership and Cooperation Agreement with the European Union in November 1994. A mass privatization program was implemented, and most industrial enterprises have been transformed into Joint Stock Companies. The National Bank of Moldova (NBM) introduced a new, stable, national currency and initiated credit auctions. As a result, the rate of inflation was reduced from 1184% in 1993 to 30% in 1995. In June 1995 the Stock Exchange started its operations. At this time Moldova was viewed as a star performer. With respect to implemented reforms, the country was ranked even higher than Romania and Bulgaria.

Moldova nevertheless failed to enter a period of economic growth. Reforms slowed down significantly after 1995. Many of earlier reform achievements looked illusionary. The most important structural reforms, notably the privatization of land, were not implemented until the end of 1990s. More generally, the government failed to create institutions conducive to growth of private entrepreneurship, to restructuring and to investments. Weak rule of law, low trust and perverse incentives were crucial in explaining the poor economic performance of Moldova. The situation of the economy after 1995 could be described as a “stable depression” that under the impact of external (currency crises in Russia and Ukraine) and internal (huge fiscal disequilibria) pressures developed into an open currency crisis at the end of 1998.

Post-crisis recovery and adjustment involved a series of ambitious reforms in 1998-2000 and brought an additional social pain. Finally year 2000 gave the beginning of economic recovery. Inflation came down again. Following general elections in February 2001 country got for the first time a solid parliamentary majority and stable government (following years of short-living multi-party coalitions) but the pace of economic reforms evidently slowed down.

During the last couple of years Moldova balanced several times of the verge of sovereign debt default and its current relations with the IMF and World Bank are very rocky. Country needs in the new long-term strategy of reforms, which will allow not only completing the transition process and avoiding danger of the next macroeconomic crisis but also will bring closer the perspective of European integration.

Дата добавления: 2017-01-14