Friday, November 7, 2008

Performance Appraisal - The Economy

Over the next few posts I want to have a look at the performance of the communist government during its eight years in office. The idea is to determine whether or not it merits another 4 years in office. As far as possible I will try to eliminate my own personal bias by using objective measures.

So here goes. Let's start by looking at the economy. On the face of it, 2000-2008 have been good years for the economy. According to the CIA world factbook, on a purchasing power parity basis, GDP per capita rose from $1,967 in 2000 to $2,300 in 2007, a respectable average growth rate of 2.3% per annum.

We need to remember, however, that the dollar itself has weakened over the period, so the result above is a little distorted. Perhaps a truer guide to Moldova's economic progress is its world ranking. Unfortunately, this has fallen from 164 in 2000 to 176 in 2007.

What about the structure of the economy? Is Moldova earning its way in the world? Figures from the National Bureau of statistics show that export receipts covered 32.8% of the cost of imports during the first nine months of 2008, the remainder needing to be covered by credit an inward remittances. This figure is down from 60.7% in 2000. To be fair, the dollar value of exports has more than tripled, a tremendous achievement. The problem is that imports are running at five times the level of 2000.

According to the CIA world factbook, Moldova's external debt in 2007 stood at a moderate 23.7% of GDP. The National Bank's website shows that general government debt has been stable at around $800m since 2000 (and hence reducing as a% of GDP). The Government's 2008 budget is balanced.

I haven't commented on inflation, interest rates and the currency, as these are largely the responsibility of the National Bank rather than the government.

On balance the communists get a passing grade for their management of the economy. They have largely resisted their totalitarian instincts to intervene, control and nationalise. They have kept the budget in balance and presided over a period of rising living standards. They do not, however, receive top marks as they have left the economy overexposed to the vagaries of remittance flows. They have also failed to eliminate bureaucratic impediments to doing business, and to break the monopolies that control some sectors.

No comments:

Post a Comment