The new government in Moldova approved the 2020 draft budget on Wednesday (Nov. 27). Gross Domestic Project (GDP) growth for next year is projected at 3.8% while the deficit is equivalent to 3.25% of GDP. The document, which was published on the government's website, sets out MDL44.1bn (€2.2bn) budget revenues and MDL51.5bn expenditures. The deficit thus is seen at MDL7bn.
The budget is built on average 2020 inflation of 5.7%, an increase of exports by 9% and an increase of imports by 7.1%. Moldova's consumer price inflation was measured at 6.8 % year-on-year in October 2019, compared with a rate of 6.3 % in the previous month, according to the National Bureau of Statistics, BNS.
In October, the economy ministry lifted Moldova’s 2019 GDP growth forecast to 4.2% from 3.7% predicted in July. GDP soared by 5.8% year-on-year in real terms in the second quarter of 2019, driven by the construction sector, retail and industry according to BNS data. The record growth in the second quarter came after the 4.4% advance in the first quarter and overall 4.0% average growth rate in 2018.
Moldova's Prime Minister Ion Chicu said the 2020 budget will be focused on investments in infrastructure and improving citizens' well-being. Chicu, who served as finance minister from December 2018 to June 2019, was nominated as Prime Minister by President Igor Dodon on November 13.
The following day, some 62 Moldovan lawmakers out of 101 voted in favour of a new minority government. The previous government of prime minister Maia Sandu was felled by a no-confidence vote just five months after it took power.
(Data source: World Bank)
Moldova also plans external borrowing of over $500mn. Out of the total borrowing, the country which is situated between Ukraine and Romania, is expected to get $160mn from the World Bank Group, $100mn from the European Bank for Reconstruction and Development and another $70mn from Russia.
Dodon, recently talked of securing $500mn from Moscow for infrastructure projects and Chicu announced earlier this week that Moldova was negotiating a loan with Russia. Chicu visited Moscow on Nov. 20 in his first foreign trip.
“We consider any cooperation with external partners through the prism of Moldova’s national interests. We are committed to investing a significant amount of money in the social sphere,” Chicu told a TV show aired by N4 TV on Tuesday (Nov. 26). “If the IMF shows flexibility, we will continue to cooperate with it. If there is no such flexibility, then we do not exclude the possibility of a pause in our cooperation,” he said.
Moldova, which has an external debt of $1.6 bn, received $157m out of $182m under a three-year IMF program expiring in March 2020.
Anatol Usatii, Economy and Infrastructure Minister, on Tuesday (Nov. 26) told TV channel Moldova 1 that the country had met all the conditions to obtain both loans and grants from both Western and Eastern partners.
GDP in Moldova averaged $4.57bn from 1990 until 2018, reaching an all time high of $11.31bn in 2018 and a record low of $1.17bn in 1999, according to Trade Economics.