Moldova’s Economy and IMF ProgramTokhir Mirzoev, IMF Resident Representative

July 2011

2

Outline

Economic background

Outlook

IMF program

3

The Real Sector Continued to Grow…Recent indicators point to revival of activity since Q4 2009. In

Q1 GDP grew 8.4% relative to 2010Q1.(twelve-month growth rates, percent)

Dec-07

Apr-08

Aug-08

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

-40

-30

-20

-10

0

10

20

-40

-30

-20

-10

0

10

20Retail Sales(real)

Industrial production(real)

Dec-07

Apr-08

Aug-08

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Apr-11

-60

-40

-20

0

20

40

60

80

-60

-40

-20

0

20

40

60

80Imports (USD)

Exports (USD)

4These trends are supported by recovering remittances and are helping the budget.

(year-on-year growth rates, percent)

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

-50

-40

-30

-20

-10

0

10

20

30

40

50External bank transfers to house-holds

2007Q1

2007Q3

2008Q1

2008Q3

2009Q1

2009Q3

2010Q1

2010Q3

2011Q1

-30

-20

-10

0

10

20

30

40

50Budget Rev-enues (exclud-ing grants)

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Financial Sector Has Resumed GrowthCredit growth has turned positive and banks’ NPL ratios are

declining.

Dec-07

Apr-08

Aug-08

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Apr-11

-20

-10

0

10

20

30

40

50

60Bank credit to non-gov-ernment (12-month growth, percent)

Dec-07

Apr-08

Aug-08

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Apr-11

0

4

8

12

16

20Banks’ NPL ratio, per-cent

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Outlook Growth looks to exceed expectations

Inflation is in line with forecast, but seasonal effects uncertain

Fiscal performance is good but needs strengthening

Current account deficit could widen temporarily

But significant downside risks still remain, especially due to external factors

2009 2010 2011 2012

GDP growth -6.0 6.9 5.0 5.0

Inflation 0.4 8.1 8.0 5.7

Current account balance (% of GDP)

-9.8 -10.2 -11.2 -11.0

Fiscal balance (% of GDP)

-6.3 -2.5 -1.9 -0.8

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IMF-supported Program 3rd program review completed on July 13,

2011 Enabled disbursement of SDR 50 mln (USD 79

mln) Total disbursements amounted to SDR 220 (of

SDR 396 million)

Budget support assistance has ended. Remaining disbursements will go to replenish NBM reserves

Planned missions: September (staff visit) and November (program review)

Performance continues to be strong although some challenges emerge

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Looking ahead: key policy issues Staying on course with fiscal strategy

Tax policy reform Medium-term budget framework Fiscal responsibility framework Budget 2012 Tax administration reform

Gradual shift of monetary policy focus on containing inflation risks

Structural reforms: Education Energy sector Financial sector Privatization

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Thank You!