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Russia Assured Moldova an Economic Slump
// Moldova's Leaders Do Not Rule Out a Budget Crisis
Data from Moldova's Economic Ministry testifies that Russia's ban on deliveries of wine from Moldova has led to a significant economic slump in the country. Industrial manufacturing declined 6.7% over seven months, plunging the country's economy back into pre-2000 conditions.
Yury Torkunov, chief of analysis and macroeconomic forecasts at Moldova's Economic and Trade Ministry, told Kommersant yesterday that the volume of manufacturing in Moldovan industry in the period from January to July of this year shrunk 6.7% in comparison to the same period of 2005. The main part of the recession hit the wine producing industry, including wine production itself (for the seven months of 2006 the industry in Moldova brought in $82 million, which is 46% less than for the same period of 2005), paper and cardboard products (12% less), and glass products (8%). The biggest drop in the volume of wine production was in April, when its output shrunk by 75%. Torkunov attributes the drop in production volumes to the ban introduced in March on the delivery of wine and spirits from Moldova to Russia, which was "a shock to the Moldovan economy."
This summer, the Moldovan Economic and Trade Ministry revised its growth forecast for the volume of industrial manufacturing, reducing it from 6.5% to 1%, although the ministry considers even this to be a "cautious forecast": it can be realized only if the delivery of wine to Russia resumes in the fall. Otherwise, Vyacheslav Ionitsa, an economic analyst at the Kishinev Institute of Development and Social Initiative (IDIS Viitorul), predicts that the recession in Moldovan manufacturing will total 10-15% by the end of the year. It should be remembered that 1999 was the last year of an economic recession in Moldova that began in 1991 – since 2000, the country's economy has been growing.
Vyacheslav Ionitsa, meanwhile, told Kommersant "we predicted a recession in industrial manufacturing in 2005, even before the introduction by Russia of an embargo on the delivery of Moldovan wine." The prediction was based on data about problems related to delivery logistics and the noncompetitiveness of Moldovan products in foreign markets. IDIS Viitorul considers the growth of the Moldovan economy between 2002-2005 to be exclusively the result of the good state of the market in Russia.
The Moldovan government is already refusing to pin its hopes on agricultural export as the basis of the country's economy and is counting on increasing the share of industry in the volume of Moldova's GDP to 18% by 2010 and 22% by 2015 (it is currently 14.9%). In 1989 this indicator was 60%, while by 1996 it had fallen to 26%. Gambles on the large-scale attraction of investment (chiefly from Russia) in the agriculture sector are falling short of expectations: Russian companies could not protect their investments in the wine and sugar sectors.
Moldova's Economic Ministry believes that even bigger problems for the country's economy could lie ahead: if the Moldovan population, in expectation of a crisis in income, cuts back on consumption and increases savings, that will lead to a budget crisis. The majority of the consumer growth in Moldova that has continued up to this point is paid for by money sent home by Moldovans working abroad.
Aleksey Daryin, Kishinev
All the Article in Russian as of Aug. 22, 2006
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