Download Global Economy

Moldova’s IMF-supported Program
Tokhir Mirzoev, IMF Resident Representative
June 2010
Outline
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Economic background
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Outlook
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IMF program
1
Economic Background
High frequency indicators point to revival of activity since Q4 2009.
In Q1 GDP grew 4.7% relative to 2009Q1.
(twelve-month growth rates, percent)
2
Economic Background (cont’d)
Positive trends were supported by recovering remittances. Meanwhile,
inflation rose recently, mostly due to one-off transitory shocks
(twelve-month growth rates, percent)
3
Economic Background (cont’d)
There are early signs that the credit crunch may have peaked, and
banks’ NPL ratios appear to be stabilizing.
High NPLs are countered by substantial liquidity and capital buffers
(CAR>30%).
4
5
Outlook
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Growth should gradually recover:
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Inflation could rise somewhat until impact of energy
prices wears off later this year
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Fiscal adjustment should continue in line with recovery
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Current account deficit will slightly widen
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Significant downside risks remain
2009
2010
2011
2012
GDP growth
-6.5
2.5
3.6
5.0
Inflation
0.4
10.8
6.0
5.0
Current account
balance (% of GDP)
-9.4
-10.4
-11.2
-10.9
Fiscal balance
(% of GDP)
-6.4
-5.4
-3.4
-2.6
IMF-supported Program
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3-year program approved by the IMF Board on January
29, 2010.
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Supported by a loan of about USD 574 million
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Seven semi-annual reviews
Low interest rates (currently zero on one half of the loan and
1.23% on the other)
About USD 150 million for budget support in 2010
The rest supports NBM’s FX reserves
About USD 90 million has been disbursed so far
Main program components:
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Fiscal consolidation
Monetary policy focused on inflation with greater ER flexibility
Strengthening financial sector stability
Structural policies to support the fiscal strategy, social policies,
and growth. Key goal: moving away from remittance-based
consumption-driven economy to export-based growth.
6
Performance
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Performance has been very strong:
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Key accomplishments:
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All performance criteria and benchmarks for Q1 2010 have been
met
A credible 2010 budget with restraints on wage and other
current spending to create space for capital and social
expenditure
A new monetary policy framework with a single nominal
anchor—inflation—and greater ER flexibility
Progress toward sustainability in the energy sector
Strengthened bank resolution and deposit insurance framework
Accelerated rollout of a means-tested social assistance scheme
Progress with de-regulation and trade liberalization
IMF Board approval of the first program review and the
next loan disbursement (about USD 90 million) expected
in mid-July
7
Reforms Going Forward
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Fiscal policy:
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Monetary policy:
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Strengthen modeling and forecasting capacity of the NBM
Further improvements of the monetary policy framework
Financial Sector
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Continued restraints on and optimization of current spending
Creating space to expand infrastructure investment while
continuing with fiscal consolidation
Sweeping reform of the tax administration system
A comprehensive contingency planning framework
Improve debt workout framework to help banks sort out NPLs
Structural reforms
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Education reform
Civil service reform
Sustainability of the energy sector
Continued de-regulation of the economy
Privatization
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9
Thank You!