Republic of Moldova

Global financial and economic crisis have not left immune the local communities in Moldova

Chişinău, 29 September 2009 --"The global financial crisis resulted in a significant drop of the Moldovan economy and caused a negative social impact at the local level", demonstrates the study "Impact of the global financial crisis on the local communities in Moldova" and presented during a round table organized today in the framework of UNDP's Integrated Local Development Programme.

The global financial and economic crisis, in particular "falling remittances, declining domestic and external demand, reduction in the foreign direct investments inflows, shrinking governmental transfers to local budgets, and increasing unemployment, have resulted into severe economic slowdown at the local level", argues the study commissioned by the United Nations Development Programme in Moldova to Expert-Grup to assess qualitatively and quantitatively the impact of the global financial crisis on Moldovan local communities and identify possible responses that local communities can adopt to cope with the crisis. For this purpose, interviews were conducted with representatives of local public administration authorities, local public services, private sector and households in addition to focus group discussions with socially vulnerable groups; public opinion poll was carried out among 1100 respondents throughout the country (excluding the Transnistria region); and a quantitative analysis of the impact of the crisis on local budgets.

According to the study, the negative effects on local budgets have led to reduction in expenditures by local authorities on investment projects and logistic-related expenses. To preserve salary expenditure at its current level, expenditure on some services (heating and electricity for public institutions, food for children in kindergartens and schools among others) will have to be severely reduced, in some cases by over 50%. At the individual and household level, the study notes that the most prominent impact was on consumption as a direct result of decreased remittances from family members working abroad.

The study also highlights that this year has seen a rise in the incidence rate of psychological problems, including depression and suicide attempts due to loss of jobs and declining income and also, due to lack of trust in tomorrow.

An important recommendation of the study is for the Government to consider a more transparent and predictable redistribution mechanism of revenues from taxes between central and local budgets. This increased autonomy would make it possible for the local authorities to 'respond to demands for higher spending or adjust to sudden downturns in revenues'. Urgently needed is a transparent and regular dialogue between the Ministry of Finance and district- and community-level public authorities to agree on a fair and transparent budget revision for 2009 and beyond. At the same time, representatives of the local public authorities should be involved in the would-to-start dialogue with the international financial organizations and bilateral donors.

"The financial and economic crisis and its related impact represent an opportunity to address more radically the weaknesses of the economy. We will continue supporting the Government of Moldova in ensuring a better life for its people and overcoming the consequences of the global crisis, including through community development projects", highlighted Kaarina Immonen, UNDP Resident Representative in Moldova.

Download the electronic version of the study "Impact of the global financial crisis on the local communities in Moldova" (Eng),(Rom)

For contact: Mircea Ursu, Project Manager, tel. 31.11.50, E-mail: mircea.ursu@undp.org or Natalia Costas, communications consultant, tel. 069221141, E-mail: natalia.costas@un.md

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