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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005 MOLDOVAN STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Politic and Economic Environment: Food processing comprises a significant portion of light industry with vegetable preservation, sugar refining, cigarette production and winemaking as major activities. Endowed with virtually no indigenous hydrocarbons and small reserves of coal, Moldova is highly dependent on neighboring Russia, Romania and the Ukraine for energy and a significant part of the country's external indebtedness is to Russia's Gasprom for natural gas. The Moldovan economy was in decline throughout the 1990s, sometimes precipitously such as in 1994 when drought destroyed virtually the entire grape harvest causing GDP to decline 31%. The Russian financial crisis of 1998 hit Moldova particularly hard as exports withered, the lei depreciated nearly 50% and inflation, which had moderated in recent years, increased as world energy prices escalated sharply from 1999. The economy contracted by 6.5% in 1998 and 3.4% in 1999. Despite both a severe drought and destructive freezing conditions near the end of the year which ruined crops and caused widespread damage to power and telecommunications infrastructure, Moldova reported real GDP growth of 2% for 2000. Key Information Contacts National Securities Commission of Moldova www.cnvm.md National Securities Depository dodon@moldse.md Department of Privatization www.privatization.md ECONOMIC RATIOS Domestic savings PAGE 100 Moldova Lower-middle-income group Trade Indebtedness Investment The eastern European nation's parliament elected Communist Party leader Vladimir Voronin as the new president on April 4, 2001. The result was widely expected after Moldova's communists swept to power in general elections in February. Voronin, 59, a former baker and police general, captured 71 of the 89 votes cast by members of parliament. "I call on all the parties in parliament and outside to reconcile and take the country out of the crisis, " Voronin said after the vote. He said his priority was to reach a settlement with eastern Moldova's Slavic separatists, who broke away in 1992 after a war that claimed 1,500 lives. Voronin also pledged to continue relations with the World Bank and the International Monetary Fund. He promised to have good relations with neighboring Ukraine and Romania. Economic Performance: After GDP growth of 2.1% for 2000, a sharp recovery ensued. GDP growth registered 6.1% in 2001 and around 7% in 2002, due to better weather and the improving economy in Russia. The National Bank of Moldova tightened monetary policy and brought inflation down to single digit rates in mid-2002. GROWTH OF INVESTMENT AND GDP (%) 20 10 0 -10 -20 97 GDI GDP In 2000, export growth as measured in US dollars was virtually zero as further lei depreciation and falling export commodity prices affected the value of exports, but imports revived and the current account expanded again to US$ 135 million, equivalent to more than 10% of GDP. Despite rapid growth in 2001, exports recovered as the currency stabilized and Russia recovered, causing the current account deficit to fall to 7.4% GDP, about US$ 119 million. The typical pattern in Moldova's current account in recent years has been a significant deficit in merchandise trade and a somewhat smaller deficit on trade in international services, combined with a steady inflow of remittances from Moldovans working outside the country and a paradoxical surplus on net factor income payments (which is not expected of a country with an external debt load equivalent to 90% of GDP). 1 1 Economic and Political Overview, County Watch Incorporated, 2005 98 99 00 01 02 03 * World Bank reports
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005 MOLDOVAN STOCK EXCHANGE MOLDOVA GDP/EMPLOYMENT BY SECTOR OF ORIGIN Sector % GDP % Employment Agriculture 31.0 45.1 Industry 35.0 25.6 Services 34.0 29.3 MOLDOVA MONEY SUPPLY, INTEREST RATES AND FOREIGN EXCHANGE RESERVES GROWTH OF EXPORTS AND IMPORTS (%) 30 20 10 0 -10 -20 -30 EXPORT AND IMPORT LEVELS (US$ Millions) 1,400 1,200 1,000 800 600 400 200 0 97 98 99 00 01 02 03 INFLATION (%) Exports Imports GDP deflator CPI Exports 97 Imports 98 99 00 01 02 03 1998 1999 2000 2001 2002 Money Supply M1 (lei-billions) 1.07 1.48 2.02 2.50 3.56 Money Supply M2 (lei-billions) 1.76 2.52 3.57 4.85 6.73 Growth Rate M1 -18.0% 38.9% 36.7% 23.6% 42.4% Growth Rate M2 -8.3% 42.9% 41.7% 35.8% 38.6% Interest Rates deposit rate 30.5% 28.5% 22.2% 14.2% 5.9% lending rate 30.8% 35.5% 33.8% 28.7% 23.5% Foreign Exchange Reserves (US$ millions) 144 186 230 229 269 Exchange Rate Period Average (lei/US$) 5.3707 10.516 12.434 12.865 13.571 Annual % Growth 16.16 95.80 18.24 3.47 5.48 40 30 20 10 0 CURRENT ACCOUNT BALANCE TO GDP (%) 0 -4 -8 -12 -16 -20 97 97 98 99 00 01 02 03 98 99 00 01 02 03 * Economic Overview, Country Watch Incorporated, 2005 * World Bank reports PAGE 101
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