European Union ready to support investment and economic recovery plan for the Republic of Moldova
The Institute for European Policies and Reforms (IPRE), in cooperation with Expert-Grup and with the support of the Hanns Seidel Foundation in the Republic of Moldova and in media partnership with Privesc.Eu and Realitatea TV, organized on Thursday, February 25,2021, a new edition of the online event #EUDebatesCafe, dedicated to the need for an investment and economic recovery plan for the Republic of Moldova.
The speakers at the event, which was moderated by Iulian Groza, Executive Director of IPRE, discussed the state of the economy and the macro-financial situation of the Republic of Moldova, taking into account the impact of COVID-19. Participants discussed which sectors are most affected and which require immediate support, which is the forecast and priorities of medium-term intervention to contribute of the economic growth of the Republic of Moldova in the next decade, and under what conditions and how could Moldova access the support of the European Union, the IMF and other development partners to finance the real sector of the economy, increasing the productivity rate, supporting SMEs and public investment.
Further, we propose some of the main interventions of the speakers.
Mathieu Bousquet, Head of Unit, DG NEAR, European Commission: “The European Union is Moldova’s main development partner. After the start of the pandemic, the EU stood with Republica Moldova and reacted very quickly with support programmes with more than 1.8 million euros for the needs of combating COVID-19.Last year we have provided support to 19.000 Small and Medium Enterprises (SMEs) from Moldova within the EU4Business.md programme. Now we have to think about the period for the economic recovery. We are preparing the multiannual indicative programme for the Republica Moldova for the years 2021-2027. We have had several consultations to understand what the country’s needs are, how we can allocate resources to cover the country’s immediate needs. Furthermore, following the meeting of the President, Maia Sandu, with European Commissioner Oliver Varhelyi, we decided to prepare a special plan to support the immediate specific needs to help Moldova’s economic recovery as quickly as possible. But it takes more things to fully implement the DCFTA. The EU is ready to support reforms aimed at the strengthening the rule of law and justice, the fight against corruption, the promotion of civic involvement. These are areas where we really want to see reforms. It is a commitment announced by the President Maia Sandu, during her visit to Brussels and we are ready to support this effort.”
Siegfried Mureşan, Member of the European Parliament (EEP), Co-Chair of the EU-Moldova Parliamentary Association Committee: The areas in which the Republic of Moldova should make priority use of the European funds it will receive in the coming years are road and energy infrastructure in order to be more connected to Europe, to be more competitive and to be more attractive to investors. All the reforms that the European Union has agreed in recent years with the Republic of Moldova remain valid even after the pandemic, especially since we saw how the lack of these reforms made it much more difficult for the Republic of Moldova to manage the pandemic. These reforms mainly concern public administration, hospital and school infrastructure, infrastructure investments, but also the strengthening of the rule of law, the fight against corruption and money laundering. There are reforms that directly contribute to increasing people’s well-being and there are reforms that make the Republic of Moldova better prepared for future crises. “
Dragoş Pîslaru, Member of the European Parliament (Renew Europe Group), Member of the Economic and Monetary Affairs Committee: “The core problem in Europe at the moment is discussion about a change in the approach to what the crisis is. What we see now at the European level is the idea of post-crisis solidarity. Thus, we are talking about a historic exercise in the EU, through which resources and efforts are shared. The solidarity is when we talk about the EU states, but also about those with European thinking. My interpretation is very simple: we do not stop at the west bank of the Prut river, but we are talking about a European effort that includes the Republic of Moldova. An important approach is that we need to understand that together we are stronger. The idea is that we are now in an extremely sensitive geo-political context. There is direct and indirect support for Moldova. Where I think it is vital for Romania and the Republic of Moldova to unite is the part of indirect support, which refers to the way in which Moldova structures its further development of society”.
Adrian Lupușor, Executive Director, Expert-Grup: “The National Platform of the Eastern Partnership of Moldova has launched a public appeal, which outlines the measures to be taken in order to support the private sector and especially SMEs, which have proven to be the most affected by the crisis. We are talking about a liquidity crisis, because the drastic drop in sales of companies immediately turned into an acute crisis. As a result, companies find it difficult to meet their commitments to employees. Fortunately, companies have not yet resorted to mass layoffs and this is showing some signs of optimism. We believe that immediate state intervention must focus on two key issues. The first is the creation of a system of state guarantee of emergency loans, especially for SMEs, especially access to credit. The second extremely important priority is to create a mechanism for partially compensating employees for reduced hours, a tool that is being implemented in many European countries”.
Lilia Palii, Secretary General, Ministry of Economy and Infrastructure: “The pandemic hit directly and indirectly in most sectors of Moldova’s economy. Moreover, the economy was also affected by the drought of 2019-2020, which brought out another vulnerability of the country – exposure to climate shocks. According to the estimates of the Ministry of Economy, the GDP for 2020 will be minus 7.7%. In 2020 the most affected sectors were domestic trade, manufacturing and especially export industry, transport and storage was another sector, services, with a focus on the HoReCa sector and last but not least agriculture. The only sector that showed a positive trend was construction. Thus, the macroeconomic projection for 2021, coordinated with IMF experts, predicts economic growth of 4.7%. The Ministry of Economy has developed a plan that provides for the limitation of the socio-economic impact of COVID-19, the economic recovery of companies and the adaptation of the economy to the conditions of prolonged pandemic. The implementation of the actions also requires additional support from the development partners”
Tatiana Ivanichichina, Secretary of State, Ministry of Finance: “Despite the continuation of the pandemic and the uncertain political situation in Moldova, I want to tell you that the Government’s agenda, together with the ministries, remains quite active. In this respect, we note with satisfaction that we have an intense dialogue with the EU, with a view to identifying areas of assistance for the period immediately following. Firstly, in recent months we have advanced with discussions on the next Association Agenda, which will set out the political priorities for implementing the association effort over the next seven years. Secondly, Moldova is working on its own national development plan, which will define the main areas that we should focus on. Thirdly, this year we should agree on the new objectives of the Eastern Partnership and we hope that we will be able to deliver tangible results in all areas. In the context of the pandemic we should have sufficient flexibility in the planning process and be prepared for unexpected scenarios.”
Veaceslav Negruță, Adviser to the President of the Republic of Moldova: “A massive investment in interconnection and infrastructure is needed. It is about the legal framework, but also the interconnection between businesspeople, so that Moldova’s business become part of the European community. The Association Agreement and the Free Trade Agreement are the documents to be implemented further. We aim that this year will held a donor forum to attract a comprehensive commitment from the EU,the IMF and other development partners to support investments and long-term economic recovery needs for the Republic of Moldova. A much more substantial commitment than the one in 2010 (i.e. Rethink Moldova). This would be a strong umbrella, not only financial, but also of credibility offered to the Republic of Moldova in the perspective of the next years. This requires justice reform, the rule of law, a new government that takes on and carries out a reform plan, including an economic one.”
Dumitru Vicol, Associate Analyst, IPRE: “The fact that the Ministry of Economy had back in 2020 a plan to revive the economy after COVID-19 is important because it could be alreay basis for a next one. We must not invent something new, but improve what is there. In order for us to recover the lost GDP, we would have to increase it by 6% in the next five years. Thus, even if we save small businesses now, we will not save the future. In this case, we tried to promote the idea that public investment is the one with the highest multiplier. It is important to understand that the countries in the region are already far ahead of us, and we are in a low-income country. Here we can develop the following sectors – fruits and vegetables, building materials, automotive and textile industry. All these sectors need investments, which could come from external partners”.
Stas Madan, Senior Economist, Expert-Grup: “Business sector has felt alone in this pandemic crisis and there is a need to improve communication and greater state empathy towards the business community. In this respect, only 2% of active enterprises received state aid during this period. However, we are forecasting an increase of 5.4% this year, but this is an increase without investment. It is obvious that we need to change this paradigm and increase investment appetite. At the level of economic recovery there would be six dimensions, among which would be the support of the business environment through bureaucratic reduction measures and controls, the increase of the level of liquidity for SMEs or financial security of the population, etc.”.
The event was organized within the framework of the project “EU DEBATES CAFÉ: Advancement of knowledge and expertise on EU institutions and policies in the Republic of Moldova”, implemented by IPRE in cooperation with the Hanns Seidel Foundation in the Republic of Moldova and with the financial support of the Federal Ministry for Economic Cooperation and Development.