March 31 (SeeNews) - Moldova's economy will grow by just 0.3% in 2022 after expanding by 13.9% last year, with the slowdown mostly due to the war in Ukraine and disruption of global supply chains, the economy ministry said on Thursday.
Calculated at current prices, Moldova's gross domestic product (GDP) is expected to total 286.5 billion lei ($64 billion/58 billion euro) in 2022, the economy ministry said in a press release announcing GDP projections until 2025.
Before Russia launched its invasion of Ukraine on February 24, the economy ministry targeted economic growth of 4.5% in 2022.
Inflation is seen at 21.9% in 2022, compared to 5.1% at the end of last year. Moldova's consumer prices rose 18.52% year-on-year in February, compared to 16.56% in the previous month, latest data from the National Bureau of Statistics, BNS, showed.
Despite the uncertain context, the ministry expects investment activity in Moldova to continue to grow this year, due to public infrastructure projects financed, in particular, from external sources of development partners. Although constrained by rising production costs and raw material insurance risks in the context of the conflict in Ukraine, opportunities will arise for the industrial sector due to declining imports from the countries affected by the conflict, the ministry added.
For 2023, the economy ministry expects Moldova's economy to pick up 3%, while for 2024 and 2025, the GDP is forecast to grow by 4.2% and 4.4%, respectively.
This scenario is based on the assumption that the war in Ukraine will not deepen significantly and the situation in the region will begin to improve, the ministry said. The forecast also assumes that the Moldovan central bank's monetary policy will be focused on countering inflationary pressures and on maintaining the stability of the national currency.
Further on, the ministry also assumes that domestic production capacities will increase in response to declining imports from the countries involved in the conflict and weather conditions will be relatively favourable.
"We note that there are still major risks and uncertainties regarding the evolution of the situation in the region, which may influence the forecast data," the ministry said.
Moldova's economy grew by 13.9% in real terms in 2021, following a 8.3% contraction in the previous year due to the coronavirus pandemic, according to data from the statistics office.
On Thursday, the European Bank for Reconstruction and Development (EBRD) said that Moldova's economy is expected to grow by 2% in 2022. The bank lowered its November forecast for 4% economic expansion.
"Moldova’s fragile economy and constrained institutional capacity mean it is struggling to cope with the influx of Ukrainian refugees. It is likely that this will seriously disrupt the reform agenda of the new government," the EBRD said in the latest edition of its Regional Economic Update report.
(1 euro =20.3899 Moldovan lei)