May 10 (SeeNews) - The European Bank for Reconstruction and Development (EBRD) said on Wednesday it has increased its projections for Moldova's economic growth to 3.0% in 2017 on the back of lower inflation and international financial assistance.
Moldova’s GDP grew by 4.1% in 2016, supported by growth in agriculture output and in household consumption, the EBRD noted in its latest Regional Economic Prospects report.
In its previous report, released in November, the EBRD projected that Moldova's economy will grow by 2.5% in 2017. For 2018, the bank forecasts economic growth of 3.5%.
However, Moldova’s narrow economic base is concentrated in agriculture, which can lead to volatile growth rates, the EBRD noted.
At the beginning of May, the International Monetary Fund (IMF) lent Moldova $21.5 million (19.6 million euro) under the country's current three-year $178 million credit facility extended in November 2016. The IMF made available to Moldova the first tranche of $36 million under the funding arrangement in November.
The agreement with the IMF reduced funding pressures by unlocking international budget support and by providing access to tranche disbursements under the programme, the EBRD said.
Moldova could also receive 100 million euro from the EU to finance its structural reforms if the funding proposal is approved by the European Parliament later this month.
There are still major banking sector challenges in Moldova, despite the recent overhaul of the banking supervision and regulatory framework, the EBRD said.
Moldova has been trying to cope with a major banking crisis since about $1 billion went missing from three of the country's banks in November 2014.
The EBRD pointed out that Moldova managed to reduce its current account deficit from 6.4% of GDP in 2015 to an estimated 4.1% of GDP in 2016. Moldova's current account deficit decreased by 33.3% to $276.5 million in 2016, according to the latest data from the country's central bank, BNM.
Also, fiscal and monetary tightening helped inflation decelerate from 13.6% year-on-year in December 2015 to 5.1% year-on-year in March 2017, EBRD added.
BNM last revised its key monetary rate in October, lowering it by 0.5%, to 9.0%, striving to keep inflation rate close to its 5.0% target. The central bank now projects 6.8% inflation in 2017 and 5.1% in 2018.
($=0.9207 euro)