The Transnistrian Region Hit by an Unprecedented Economic Crisis

The crisis has triggered social and budgetary crises: population incomes fell by about 30%, consumption by 21-22%, and wage arrears rose almost 4.5 times. An inefficient tax system, with no VAT and an excessive focus on direct taxation of firms, and a worsening demographic crisis add to the strain.

Over the next 2-3 years the study sees three major risks: faster export decline (the EU accounts for almost 60% of exports), a sharper fall in consumption as savings run out, and hyperinflation fuelled by money-supply growth and an artificially fixed exchange rate. Adrian Lupușor said that implementing the trade provisions of the Association Agreement could bring 8-10% growth in 2016, while failing to do so risks a 3-5% decline. Expert-Grup also urges authorities to stop burdening private business with public obligations and to reform taxation, introducing VAT and aligning with the system on the right bank.