Expert-Grup

Problems in the Banking Sector Have Left Their Mark on the National Budget

Tuesday, 4 August 20153843 views
Problems in the Banking Sector Have Left Their Mark on the National Budget

Automatically translated summary. The full article is available in Romanian.

A new study by the Independent Think Tank “Expert-Grup” analyses how recent macroeconomic developments and banking-sector problems affect Moldova’s National Public Budget. It concludes that the current economic downturn is driven mainly by domestic factors, above all the banking crisis, rather than by external ones.

According to the study, poor management by the National Bank of Moldova led to an excessive depreciation of the leu, while weak supervision caused instability. Inflation and credit costs rose, real household incomes fell and imports declined. For 2015, tax revenues could fall by about MDL 1.5 billion (3.5% of planned revenue), mainly because imports dropped 21.7% to USD 4.16 billion. Import VAT falls by MDL 1.35 billion, excise duties by MDL 333 million and customs duties by MDL 186 million. Unlikely resumption of World Bank and EU financing would add a gap of over MDL 2.1 billion (4.6%).

If state guarantees to the National Bank are activated in September 2015, extra spending would be about MDL 570 million; the full ten-year cost is about MDL 13 billion if loans are fully recovered. In a pessimistic scenario, public debt peaks near 50% of GDP in 2018, about 12 percentage points below the 62% threshold, keeping Moldova at moderate insolvency risk, though a sharp growth slowdown could raise it to “strong”.

View the original article in Romanian