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Cristina Batog, Ernesto Crivelli, Ms. Anna Ilyina, Zoltan Jakab, Mr. Jaewoo Lee, Anvar Musayev, Iva Petrova, Mr. Alasdair Scott, Ms. Anna Shabunina, Andreas Tudyka, Xin Cindy Xu, and Ruifeng Zhang
The populations of Central and Eastern European (CESEE) countries—with the exception of Turkey—are expected to decrease significantly over the next 30 years, driven by low or negative net birth rates and outward migration. These changes will have significant implications for growth, living standards and fiscal sustainability.
International Monetary Fund. European Dept.

Abstract

After solid growth in 2015, the Central, Eastern and Southeastern Europe (CESEE) region is now heading into choppy waters. Lower euro area and U.S. growth, tighter global financial conditions, and continued weakness in many emerging economies are creating headwinds. Nonetheless, near-term growth is expected to remain robust in most CESEE countries outside the Commonwealth of Independent States (CIS), thanks to strong domestic demand. At the same time, output contraction is projected to moderate in the CIS, as the shocks that hit the Russian and Ukrainian economies gradually reverberate less and activity stabilizes. While downside risks are now more pronounced than in the fall of 2015, policies in most economies will need to rebuild room for maneuver.

International Monetary Fund. European Dept.

Abstract

Despite the strong cyclical rebound, growth in CESEE remains well below precrisis levels. If lower potential growth in CESEE turns out to be the “new normal,” this would imply a much slower pace of income convergence with advanced Europe. This chapter explores the reasons behind the postcrisis growth slowdown by looking at labor, capital and productivity trends across the region. It also aims to identify the key gaps between CESEE and advanced Europe – with regard to capital deepening and productivity – as well as the specific institutional and structural features of CESEE economies that might explain these gaps. While there is no magic formula for fast convergence, the hope is that this chapter will provide some insights for ongoing policy discussions in the region on how to get back on a fast convergence track.

International Monetary Fund. European Dept.

Abstract

In the baseline, supportive monetary policy and medium-term fiscal consolidation remain valid for many economies in the region. In the event of a negative growth shock, monetary policy should be the first line of defense, while automatic fiscal stabilizers should be allowed to play freely, provided there is enough fiscal policy room to do so. In case of a major shock and depending on the nature of the shock, fiscal policy should ease within the medium-term adjustment plans that dispel concerns about sustainability. Against the backdrop of mediocre global growth prospects, structural reforms are critical to lift potential growth and re-accelerate convergence.

International Monetary Fund
During the twin crises of 2008–09 Georgia’s foreign exchange reserves have been exposed to a number of external and internal drains. Its exports declined by 21 percent from peak to trough. Bank deposits declined by more than 20 percent in late 2008–early 2009, while deposit dollarization increased sharply. FDI declined from 16.4 percent of GDP in 2007 to an estimated 5 percent of GDP in 2010. Georgia was able to limit the impact of these drains on its international reserves.
Mr. Milan M Cuc, Mr. Erik J. Lundback, and Mr. Edgardo Ruggiero

Abstract

Labor migration and remittances, which have increasingly become a part of the global landscape, have profound economic and social consequences. Moldova, a small low-income country where an estimated one-third of the economically active population has been working abroad, is an interesting illustration of this trend. Drawing on household survey data, this Special Issues paper explains why Moldovan workers go abroad and how their remittances are used. With this background, it provides insights into policy challenges of coping with, and maximizing benefits from, international labor mobility and the large inflows of remittances.

International Monetary Fund. European Dept.

Abstract

This paper discusses the robust growth that continues in most Central and Southeastern European economies as well as in Turkey. Accommodative macroeconomic policies, improving financial intermediation, and rising real wages have been behind the region’s mostly consumption-driven rebound, while private investment remained subdued. In the near-term, strong domestic demand is expected to continue supporting growth amid continued low or negative inflation. The Russian economy went through a sharp contraction last year amid plunging oil prices and sanctions. Other CIS countries were hurt by domestic political and financial woes, as well as by weak demand from Russia. In 2016, output contraction is projected to moderate to around 1½ percent from 4¼ percent in 2015 as the shocks that hit the CIS economies gradually reverberate less and activity stabilizes. In the baseline, a combination of supportive monetary policy and medium-term fiscal consolidation remains valid for many economies in the region.