Measuring external macroeconomic imbalances and competitiveness in the Republic of Moldova

Abstract

In the context of frequent crises and multiple vulnerabilities faced by the Republic of Moldova, increasing competitiveness of the national economy has become an imperative for strengthening the resilience to external shocks. As a result, it is necessary to adopt a set of indicators that would allow a proper analysis of economic trends, ensure early warning of crises, and serve as signals for activating protection mechanisms in case of external shocks. In line with this concept, the author aimed to analyze international experience in this field and to extrapolate external practices to the national context. Thus, the author analyzed the set of indicators used in the European Union to identify and monitor external macroeconomic imbalances and competitiveness, and, subsequently, calculated the same variables based on data for the Republic of Moldova. The results of this exercise indicate the existence of a number of acute macroeconomic imbalances in the Republic of Moldova, which are of a chronic nature, such as: negative current account, net international investment position, accelerated growth of unit labor costs, and rapid appreciation of the Real Effective Exchange Rate. This situation, in turn, contributes to the widening of Moldova`s specific competitiveness deficit.