October 6 (SeeNews) - Moldova's economy is expected to expand by 6.8% in 2021, the World Bank said, raising its June forecast by 3 percentage points.
In 2022, Moldova's gross domestic product (GDP) is expected to grow by 3.9%, compared to a rise of 3.7% projected in June, the lender said in its October 2021 Europe and Central Asia Economic Update report published on Tuesday.
Moldova is recovering swiftly, and growth is expected to be above potential in the medium term, the bank said, stressing that short- and medium-term forecast is under several assumptions related to the containment of the COVID-19 pandemic, implementation of a broad-based reforms program, and sustained fiscal support.
In case of a resumption of the pandemic, the authorities should first and foremost focus on the health sector to manage the pandemic while striking a balance between long term reforms and mitigation measures, the bank said.
Even though consumer and investment confidence and all sectors are expected to register a strong growth, their 2019 level will only be reached after 2022, according to the report. Strong domestic demand and higher global energy prices are expected to propel current account deficit, while inflation is expected to fluctuate in the
upper bound of the corridor in the second half of 2021, breach the corridor in 2022, and stabilize to 5% in 2023.
Fiscal deficit in the medium term is expected to remain higher than in pre-Covid-19 period with the 2022 budget to reflect the promised increase in minimum pensions and new external resources from IMF, the EU and other development partners, the bank said, adding that as a result, public debt is expected to increase further, while remaining relatively low by international standards.
In line with the recovery in the labour market and strong remittance receipts, poverty is expected to decrease from 13.7% in 2020 to 10.6% in 2021, the World Bank estimates. Looking further forward, under the assumption of continued improvement in the labor market and strong remittance inflows, poverty is anticipated to continue to fall further to 9.2% in 2022.
Downside risks to an inclusive recovery include the slow pace of vaccination, the possibility of the reintroduction of containment measures, the possibility of adverse climate events, and rising food inflation, the World Bank noted.
(1 euro =20.3383 Moldovan lei)