Benchmarking Investment in Moldova Utilizing the Forecasts from a Time-Series Model with Some Recommendations for the Conduct of Policy

Abstract

Investment is critical for an economy’s growth and development and investment attraction is a priority for the Moldovan authorities. Investment in Moldova is low especially when compared to other transition countries. The paper fits a time series model on the quarterly evolution of investment in constant prices and generates forecasts which may be interpreted as benchmarks defined solely on the historical evolution of investment. Following an analysis of the structural characteristics of public investment and the recent improvement in the regulatory framework for public investment management, the paper proceeds to provide policy recommendation for both private and public investment. With regard to private investment attraction policy should: a) simplify further the regulatory framework and digitise the economy; b)intensify the efforts to strengthen the Moldovan banking system and its intermediation; c) promote Moldova as an investment destination and provide information to potential investors; and d) promote Moldova’s European integration, improve the transparency and predictability of Moldova’s investment climate, and promote a rules-based level-playing field for investment. With regard to public sector investment policy should: a) enforce the use of Regulation 684 which improves public investmentmanagement; and b) develop a pipeline of well-designed public investment projects eligible for financing which will strengthen public investment management, address a number of existing challenges and contribute to effective macroeconomic management. CZU: 330.322.14:338.1(478); JEL: C22, E22