A. Gudim, V. Negruta:
Interviews for Basa-Press News Agency, 28 December 2002

Estimations of Year 2002 Results and Forecasts for 2003

ANATOL GUDAM: ACHIEVEMENT OF A 6-7-PERCENT GDP GROWTH IN
2003 IS QUESTIONABLE

Chisinau-28.12.2002/10:56:15/(BASA-economic)

Question: How was the economic year 2002 for Moldova? Which are the
forecasts for 2003 ?

Anatol Gudam, director of the Centre for Strategic Studies and
Reforms:

The year 2002 was a good one, both from the statistical point of view
and from the social point of view. It was also a good year for the
agriculture, in general, as well as for the agricultural business, in
particular, which insures a big share of exports and incomes to the
population. 2002 was also a good year for the power, which, despite
the spring movements, managed to keep the country's stability. It was
a good year for the National Bank, which continues being the main
promoter of reforms and stability in economy. I am mainly referring
to the low inflation, growth of currency reserves and an efficient
monetary policy.

Our citizens working abroad have transferred more money into the
country, increasing thus the interior consumption. Imports also
rose.

But there are still a lot of problems, which, unfortunately, will
continue being felt in the next year too. Reforms are held under
the go-and-stop regime. We are going forward, then we stop, then we
move again and stop again. As a result, tensions with the
International Monetary Fund and the World Bank fail to be
overpassed. These institutions have some reserves toward the
stability and continuity of reforms. The state administration
continues being of a low quality. The power's movements are too
much politicized, the concord in the economic reform is missing, we
have a lot of strategies, programs and notions, but only in the
written form. Less than half of ministers, approved two years
ago, continue working now. The same happened with their deputies.

Before 1989, the Socialist Moldova counted 45 ministries, state
committees and simple committees. Now we have 17 ministries, but the
number of structures subordinated to the government, of different
departments and agencies is rather high. Immediately as we have a
new problem, the government creates a new department to solve it.

The business environment is formally liberalized. In fact, there
are many barriers. The financial market is not enough developed.
Investments per capita over the last five years are lower than in
Estonia, Latvia and Lithuania, as well as in Georgia and Armenia.
There are a lot of barriers affecting the external economic
activity. Exports over the first half of 2001 rose by 22 percent,
while in 2002 - only by 5.5 percent.

Moldova counts the highest share of exports to Russia among the
Commonwealth of Independent States. Even higher than Belarus. This
means that the dependence of trades on a single country is very
sensible.

There are eight years since the conclusion of the agreement on the
partnership and cooperation between Moldova and the European Union
(1994) and four years since this document was enacted (1998), but
the fulfillment of this agreement is going on very slowly and
unsteadily. We failed to get any advantage from joining the World
Trade Organisation, although this act was appreciated as a success.

Unfortunately, Moldova's external and domestic debts rose. The
National Bank granted money to the Finance Ministry in the third
quarter. The domestic debt rose, because, as a rule, it is not
reimbursed.

Of course, I would be tempted to forecast for 2003 a 6-7-percent
economic growth, but, I think we must make these forecasts very
attentively. The growth we had in 1999, 2000 and even in 2001 was
an impact of the 1998 crisis.

The achievement of a 6- 7-percent growth is doubtful for the simple
reason that this year, the government failed to identify any
sources for the economic growth. I am referring, first of all, to
the attraction of investments, stimulation of exports, tax
collection. The customs supplies 70 percent of incomes to the
budget. Besides, the first half of the next year will be marked by
the local elections, and, as a result, the economy will be
influenced by many extra-economic factors.

VEACESLAV NEGRUTA: ECONOMIC POLICY IN 2002 WAS GENERALLY
CONFUSED

Chisinau-28.12.2002/10:37:01/(BASA-economic)

Question: How was the economic year 2002 for Moldova? Which are the
forecasts for 2003?

Veaceslav Negruta, economist, independent expert:

Today we would talk less about concrete figures, as many indicators
may have changed just like last year, in the sense of a higher or
lower growth. One thing, however, is certain: the economic policy
in 2002 was generally confused, some decisions were cancelled or
neglected for the simple reason that the political objectives were
poorly highlighted from the very beginning.

The confused message regarding the economic policy also comes from
the fact that the Government has been between the hammer and the
anvil. On the one hand, it was obliged to fulfill the governing
programme, and on the other hand, it had to meet the commitments
assumed in the Memorandum on Economic and Financial Policies with
the International Monetary Fund, and then in the supplement to this
document. Sometimes the objectives of the memorandum and governing
programmes did not coincide.

Irrespective of the results or growth for the year 2002, the Moldovan
economy continued to remain vulnerable and open to external risks.

The economic growth in Moldova in the recent years is owed mainly to
the growth in the region, in general, and in Russian, in particular.
The decline in 1998-1999 was a result of the influence from the
regional factors, and especially those from Russia. For this reason,
we should be alerted of factors that alert the Russian economists:
the slowdown of the economic growth in that country. In this case,
the growth in Moldova will lose speed and pace, too. From this point
of view, I fear that the forecast regarding GDP and other indicators
for 2003 is too optimistic.

The internal sales market for Moldovan products has been saturated,
and the growth will, respectively, slow down. We have a relatively
low inflation, and perhaps the lowest in the region. At the same
time, the monetary policy in 2002 was relatively relaxed in
comparison with the period 1998-2001. Both the monetary basis and the
monetary mass has increased significantly. I presume that a large
part of this increase has been absorbed by the economic growth, and
we may witness some pressure on the level of inflation next year.

The low inflation is also owed to the relatively stable rate of the
national currency throughout the year 2002, but there is a factor
that makes the outgoing year special in comparison with the previous
years. Look into the archives and you'll see that in March and in
late October, when the leu registered a light depreciation versus the
U.S. dollar, all banks - except for two or three - posted the same
rates. This was an event without precedent in Moldova until then.
Most of the banks posted the same quotations, something that seems to
be unbelievable under the free floating regime. The expected
devaluation of the leu was slowed down, and the banks had contributed
to this fact thanks to their decision to coordinate the rate of our
currency.

The increase of certain tariffs regulated by the state has been
frozen. But in 2003 and 2004 those reforms and increases will be
inevitable, and there will be a new pressure on the inflation rate.

If we analyze by comparison the consumption price index and the
production price index, we observe that the motivation of the private
sector and entrepreneurs has declined in 2002. The consumption price
index was relatively low, while the production price index has
increased, which means that the profit of our businesses has dropped.
Consequently, the motivation to produce has dropped, too.

The rate of profit at the securities market tended to decrease in
September and October, the interest rate reduced to 4 percent, and
today we have interests that exceed 10 or even 12 percent, a fact
demonstrating again that we should expect a pressure on the inflation
in the year 2003.