Expert-Grup

Anti-crisis macroeconomic policy: from defence to offence in combating the effects of COVID-19

Protecția socialăThursday, 23 April 20208155 views

Automatically translated summary. The full text is available in Romanian.

An analysis by Independent Think Tank “Expert-Grup” argues that the Moldovan Government and the National Bank of Moldova should move from reactive, defensive measures to a proactive, coordinated macroeconomic policy against the COVID-19 crisis, combining fiscal expansion and monetary easing in spring 2020 and beyond.

The article notes that COVID-19 hit both demand and supply: about two thirds of firms expect revenue to fall by over 35%. The amended 2020 budget raises the deficit to a record MDL 16 billion (7.5% of GDP), financed mainly by the IMF (MDL 4.4 billion) and Russia (MDL 4.2 billion). The author calls this insufficient: the deficit stems from lost revenue, not real expansion (at least 5% of GDP is needed), banks' liquidity is untapped, and reserve requirements remain high at 34% in lei and 20% in foreign currency.

The proposal has two stages. From May to July 2020, spending would rise by about MDL 12 billion, funded by government securities and reserve requirements cut to 15%, with wage compensation, allowances and 50%-80% state guarantees. From August to December, the National Bank of Moldova would inject MDL 10-12 billion via REPO operations, while guarantees would target investment in restructuring the economy. The total effort would be MDL 20-22 billion.

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Anti-crisis macroeconomic policy: from defence to offence