“We have to be bold and this is what we are doing right now. We are undertaking reforms that will unlock a much bigger growth potential,” Alaiba told SeeNews on the sidelines of the annual meeting of the European Bank for Reconstruction and Development (EBRD) in Yerevan, Armenia last month.
“This is what Moldova needs and I think it is realistic to say we can accomplish it because the base is quite low, there is a lot of space where we can grow during the next decade and this is what has been the experience of other countries in the region that have embarked on the path to EU integration,” he added.
Moldova's economic output edged up by 0.7% in 2023, driven by agriculture, according to national statistical data.
The European Commission projects that Moldova’s economy will expand by 2.9% this year, while the EBRD expects growth of 3.5% in 2024 and 3.7% in 2025, boosted by reforms made by the country towards its objective of EU accession.
In December 2023, the European Council decided to open accession negotiations with Moldova. In the autumn, the country will hold a referendum on accession to the European Union, aiming to ensure that future governments will not derail it from its European trajectory.
To accelerate growth, the government has launched a series of administrative and tax reforms.
“Last year alone, we removed barriers to doing business worth at least 0.5% of GDP, and we are pushing for even bigger reforms this year,” Alaiba said.
In 2023, Moldova scrapped taxation of profit that is re-invested, aiming to encourage companies to expand their business.
At the beginning of this year, the landlocked country with a population of 2.5 million tucked between Romania and Ukraine opened its labour market to citizens of 47 countries.
“As a citizen of the EU or an EFTA country, U.S., Canada, the Western Balkans, Ukraine, or south Caucasus, you can come to Moldova on a tourist visa, sign an employment contract and start working,” Alaiba said.
This step can bring an additional 1% to GDP, he stressed.
Digitalisation is a huge enabler of growth, according to the economy minister.
“When I took office in June last year, about 38% of public services for entrepreneurs had been digitalised. Now this share is already 60% - almost a double increase within a year. We are going for 75% this year and we are aiming for 100% in the coming years because this is a plus on productivity and efficiency for each company and for each entrepreneur, small and large, and it is discouraging corruption.”
INDUSTRY IN FOCUS, 7% FLAT TAX FOR IT SECTOR
“The problem that we need to solve is to boost the industrial sector,” Alaiba said.
The share of industry in Moldova’s GDP has declined to just 8% from 40% over the last three decades, he added. Furthermore, only 3% of industrial output is high-value added and a very modest part is exported.
To reverse the downtrend, attract investments and encourage exports, the government plans to launch state aid schemes in support of SMEs operating in several sectors in which it believes it has a competitive advantage - electronics, automotive, pharma, food processing, and energy.
“The IT sector is very promising,” Alaiba said. “Over 60% of Moldovan GDP comes from IT. The sector has seen very robust growth of 7-9% per year over the last decade and will keep growing because there is still space.”
To back its IT sector, Moldova has enforced a 7% flat tax on its turnover, with no other tax levied on either the employer or the employee.
OPENING UP CAPITAL MARKET
Moldova needs a clear strategy for the development of its capital market to attract investment and feed growth, Alaiba stressed.
Turnover on the country’s stock exchange stood at a mere 582,000 Modovan lei ($33,000/30,280 euro) in the week to May 24, according to data published on its website. The Moldova Stock Exchange does not have a secondary market for government bonds.
By the end of the year, however, the government plans a reform of the capital market legislation and a restructuring of the bourse, aiming to ease the access of private investors.
“This is a growth driver that we see contributing a further 0.5% of GDP,” Alaiba opined.
($ = 17.6439 Moldovan lei)
Jun 25, 2024
