October 1 (SeeNews) - Moldova's economic output is expected to decrease by 5.5% this year before recovering to 3.5% growth in 2021, the European Bank for Reconstruction and Development (EBRD) said on Thursday, downgrading its previous forecast.
Risks to the new economic outlook are weighed to the downside, reflecting the uncertain path of the pandemic in the coming months, the EBRD said in the latest edition of its Regional Economic Prospects report.
In the previous issue of the report released in May, the EBRD said it expected Moldova's economic output to decrease by 4% this year and grow by 5% in 2021.
The bank stressed that the health crisis has had a major negative impact on Moldova's already decelerating economy.
The GDP growth rate slowed to 0.9% year-on-year in the first quarter of 2020, driven by a drop in exports and private consumption, although investments in fixed assets remained buoyant on the back of significant construction activity. In the second quarter, output contracted by 14% year-on-year as all sectors of the economy posted large declines, the EBRD noted.
The disruption of global supply chains in the early days of the pandemic hurt Moldova's exports of automotive components, which are well integrated into global value chains. The EBRD also said that domestic Covid-19 containment measures have stopped the activities of many services enterprises, while plummeting remittances in March and April hit household disposable incomes and consumer demand.
As a result, economic activity bottomed out in the second quarter of 2020.
"Since May, remittances have been recovering strongly and other short-term indicators point to a gradual resumption of domestic economic activity and exports, although they remain in negative territory in year-on-year terms," the EBRD said.
As of September 30, Moldova, with a population of 3.5 million, had 53,042 confirmed cases of Covid-19, including 1,320 deaths from the disease, according to health ministry data.