January 31 (SeeNews) - Moldova, which has taken a categorical pro-Europe stance in the aftermath of Russia's attack on Ukraine, should focus its efforts to improve the competitiveness of its economy and make its products and services meet EU standards, economic analyst Dumitru Vicol told SeeNews in a recent interview.
"The categorical pro-Europe and anti-Russia sentiment should focus on creating the economic environment that would lead to higher quality and competitive Moldovan products and services," Vicol said.
At the end of last year, President Sandu said that she would like Moldova to join the EU by 2030.
This leaves Moldova with only seven years to make a "gigantic leap to transform its anemic economy into a competitive one such as Estonia or Croatia," Vicol said. "In my humble opinion, this is very unlikely, unless Moldova succeeds to be part of a Marshall kind of reconstruction plan for Ukraine. Moldova’s EU prospects are increasingly dependent on Ukraine," he added.
The country is closer to the EU standards now compared to ten years, but the speed of convergence has been too slow, he stressed.
For example, if Romania's GDP continues to grow at 3-3.5% and Moldova at 4-4.5%, the average salary in Moldova would catch up with Romania’s average salary in a century, he went on to say. "Things are changing too slow, but there are hopes that the speed of convergence will dramatically increase in the following ten years as Russia’s leverage on Moldova is waning," Vicol commented.
At this stage, when the Western markets are still not a viable option for many Moldovan producers, a potential withdrawal from the Commonwealth of Independent States (CIS), which would cut off Moldova from the markets of Kazakhstan or Azerbaijan, does not, in Vicol's view, hold immediate advantages for the country.
The Commonwealth of Independent States (CIS) is a regional intergovernmental organization formed following the dissolution of the Soviet Union in 1991. Its member states are Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. Foreign minister Nicu Popescu's January statement on Moldova considering to leave the bloc as its is not an active member anymore was the latest of a series of announcements by various Moldovan officials in this vein. In May however, president Maia Sandu said that Moldova is not considering a withdrawal of its membership in the CIS for the time being.
Latest data from the statistics office indicated that 23.3% of Moldova's total exports during January-November went to CIS countries, up by 8.3 percentage points compared to the previous year. At the same time, exports to CIS amounted to $929.3 million (852 million euro), increasing by over two times on the year, mostly due to exports of petroleum products and liquefied gas to Ukraine, which increased sevenfold on the year in the context of Russia's military invasion, data indicated. Otherwise, Moldova's exports to EU countries such as Romania and Italy increased by an annual 52.3% and 40.9%, respectively, data indicated.
In terms of imports, most non-energy products could be easily be replaced by the EU alternative, even though at higher price, he went on to say.
Leaving CIS in the context of Moldova's dependency on Russian gas and energy from the breakaway region of Transnistria will not have major consequences, as Russia’s energy leverage on Moldova has significantly diminished this year thanks to enormous efforts to diversify gas purchases, Vicol noted.
Dumitru Vicol is an EM Strategist for Abu Dhabi Investment Authority. Previously, he has worked for Citi, UniCredit, Mizuho International and Societe Generale Private Banking.
($=0.9237 euro)