Economic commentary by MOLDPRES State News Agency

Money transfers to individuals were and remain one of the growth engines of the economy. Explanation is on the surface, more money is coming, consumption increases boosting economic change.

This increase in remittances is a positive factor in short term. In the medium to long term, the economic growth in consumption and welfare of people is dangerous, it will increase balance of payments deficit. IDIS Viitorul economist Veaceslav Ionita said that money transfers of Moldovans working abroad, “even if they remain at a fairly high level, no longer play an important role in given that exports exceed money brought into the country already the third year in a row”. In 2017, remittances will amount to 1.27 billion dollars, and sales of foreign currency – 2 billion dollars, below revenue from exports.

The money from the remittances has been exhausted, the only possibility for Moldova’s development is the internal resources by attracting investments, creating jobs and providing income inside the country, the expert said. He predicts that in 2018-2019 the salary on economy will exceed the volume of remittances.

According to the economist, providing revenues to the state budget was based until recently on the transfers of Moldovans working abroad. “During 18 years the remittances of Moldovans through officials channels (banks and transfer systems) amounted to 18 billion dollars, and the sum amounts to 27 billion if we consider the volume of currency sold on the foreign exchange market in cash. The 9 million-dollar-discrepancy shows that the money was bought in cash by Moldovans who came home”.

Experts of the National Institute of Economic Research say they are not sure that the increase in transfers in favor of individuals “will be maintained, given the reunification of families established abroad”.

Data by the National Statistics Bureau confirm that the share of transfers in the income of people is decreasing, from 18 per cent in the third quarter of 2014, when a record level of remittances over the past ten years was set, when passing over 1.6 billion dollars, 14.6 per cent, in the same period of 2017. On the other hand, the share of wages increased from 40.7 per cent in the third quarter of 2014 to 43.5 per cent in the same period of 2017.

It is clear and the statistics confirm that the welfare of people has been determined, even in the years of increasing transfers, by wage income and then by money sent from abroad.

This discrepancy is expected to deepen in the coming years. The average monthly salary on economy increased from 4,172 lei in 2014 to 5,700 lei in 2016, and the average salary forecast on economy amounting to 6,150 lei was approved during the cabinet meeting. The Ministry of Economy and Infrastructure expected a figure of 7,250 lei in 2020. The growth rate of the gross nominal average wage is above the level of increase in transfers, having an uncertain evolution, if we consider the 30-per cent-fall in remittances in 2015, followed by a less pronounced decline of 4 per cent in 2016.

Obviously, the role of transfers should not be neglected. “The real increase in public transfers and the recovery of remittances will help sustain growth in the medium term”, World Bank economist Marcel Chistruga said.

The Expert Grup centre notes that it is necessary to rethink Moldova’s economic growth model by implementing systemic reforms that will have an impact on the quality and dynamics of economic growth in the coming years. In this respect, improving the competitiveness of the Moldovan economy “must continue to be the zero priority for the authorities”.

 (Reporter V. Bercu, editor A. Răileanu)