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National Bank of Moldova

Translation

Annual Report

2012

1 Grigore Vieru Avenue • MD 2005 Chis, inau • www.bnm.md • E-mail: [email protected]

Annual Report (NBM, 2012)

Note

The report was compiled using the latest statistical data held bythe National Bank of Moldova, the National Bureau of Statistics,the Ministry of Economy and the Ministry of Finance.

Also, were used data provided by international organizations andcentral banks of neighboring countries.

Computation of some statisitcal data was conducted by the Na-tional Bank of Moldova.

All rights reserved. No part of this publication may be reproduced,and the use of data in studies is allowed with the proper specifica-tion of the source.

National Bank of Moldova1 Grigore Vieru AvenueMD-2005, ChisinauTel.: (373 22) 409 006Fax: (373 22) 220 591

ISBN 978-9975-4353-2-1ISBN 978-9975-4438-9-0

c© National Bank of Moldova, 2013

Foreword

The year of 2012 proved to be the year of macroeconomic tur-moil and challenges against the background of the unfavorableexternal environment, marked by the sovereign debt crisis in theeuro zone. The escalation of the euro zone crisis has highlightedyet again the vulnerability of the Republic of Moldova to theexternal environment developments. However, we can say thatthe Republic of Moldova has successfully coped with externalchallenges in 2012.

Given the share of trade with the European Union, and thelarge number of Moldovan migrants working in this region, thetensions in the Eurozone have affected the local economic envi-ronment through the capital flows and foreign trade channels.The national economy in 2012, which was affected by the severedrought, contracted by 0.8 percent compared to the previousyear.

As for the NBM, the year of 2012 was successful in terms ofachieving its fundamental objective of ensuring and maintainingprice stability, despite the risks of deflation recorded at thebeginning of the year. For the first time in the last 20 years,the annual inflation rate has remained at single digit levelsfor three consecutive years. During 11 months of 2012 theconsumer price index stood near the target of 5.0 percent,


reaching the level of 4.1 percent in December 2012. Bringinginflation close to the target of 5.0 percent has brought manybenefits both to investors and the public, and to the developmentof a sustainable economic potential of the Republic of Moldova.The last forecast of the National Bank of Moldova Bank placesthe inflation rate for 2013 and 2014 in the bottom part of thevariation range of ±1.5 percentage points from the target of 5.0percent.

The reduction of domestic and external demand and the disin-flationary pressure from the appreciation trend of the nominalexchange rate of the national currency against the currenciesof major trading partners have largely helped inflation to fallwithin the target range. The inflationary environment wassupported by the increase in food prices on the background ofdrought in the region in conjunction with the side effects ofincreases in utility tariffs in the fall of 2011 and increase inelectricity tariff in May 2012.

During 2012, the National Bank of Moldova purchased on thedomestic foreign exchange market a net amount of USD 310.1million in order to counter disinflationary pressures from do-mestic demand as well as to ensure the consolidation of foreignexchange reserves. The historical maximum level of foreignexchange reserves at the end of 2012 has further strengthenedthe financial security of the State.

The official reserve assets amounted to USD 2515.0 million atthe end of 2012, which is by 28.0 percent more than in 2011,covering about 4.7 months of imports.

The specific conditions of 2012 demanded an adaptive monetarypolicy, able to respond promptly and effectively to economicvulnerabilities. The deterioration of economic outlook for 2012and 2013 made the National Bank of Moldova to carry out apronounced expansionary monetary policy. Thus, the NationalBank of Moldova reduced in the first two months of 2012 themonetary policy interest rate from 8.5 percent to 4.5 percentannually.

Maintaining the monetary policy interest rate at the level of4.5 percent by the end of 2012 ensured real monetary incen-tive conditions for domestic demand, without jeopardizing theacceleration of inflation above the target of 5.0 percent.

The loosening of the monetary policy supported the continueddecline in interest rates on loans and boosted the lending activityof banks. In 2012, the balance of loans granted in MDL to theeconomy and the population increased by 20.1 percent. InDecember 2012, the interest rate on new loans in MDL recordeda historical minimum level of 11.98 percent.

The National Bank has paid particular attention to strengtheningthe domestic banking sector by focusing on improving the legalframework that targeted streamlining the regulatory frameworkand efficiency of banking supervision. In particular, new report-ing requirements have been imposed to licensed banks, whichinvolves increasing the transparency of banks and measureshave been taken to stimulate the lending activity of banks.

In December 2012, the new Medium-term Monetary PolicyStrategy was approved, which is a continuation of the MonetaryPolicy Strategy of the National Bank of Moldova for 2010-2012.The new strategy includes primary directions of activity of themonetary authority on medium-term, aimed at strengtheningthe monetary policy framework specific for the inflation target-ing regime and achieving the fundamental objective of ensuringand maintaining price stability.

In 2012, we managed to anchor inflation expectations aroundthe target of 5.0 percent, including by increasing transparencyand the quality of communication of the National Bank withvarious target groups and by strengthening the NBM credibility.

We believe that this credibility is the reward for our work.

Thank you for your support!

Dorin Dragut,anu

Governor


Contents

Summary 4

1 World economy in 2012 9

2 The economic situation of the Republic of Moldovain 2012 14

2.1 Real sector . . . . . . . . . . . . . . . . . . . . . 14

2.2 Inflation . . . . . . . . . . . . . . . . . . . . . . . 21

2.3 Public sector . . . . . . . . . . . . . . . . . . . . 26

2.4 The evolution of the external sector of nationaleconomy . . . . . . . . . . . . . . . . . . . . . . 28

2.5 External debt of the Republic of Moldova . . . 34

3 The activitity of the National Bank of Moldova in2012 37

3.1 Achievements of the monetary and foreign ex-change policy in 2012 . . . . . . . . . . . . . . . 37

3.2 The results of monetary and exchange rate policyduring 2012 . . . . . . . . . . . . . . . . . . . . . 50

3.3 Monetary market . . . . . . . . . . . . . . . . . . 57

3.4 Activity of the National Bank ofMoldova as fiscal agent of the state . . . . . . . . 64

3.5 Foreign Exchange Market . . . . . . . . . . . . . 65

3.6 Supervision and regulation of banks’ activity . . . 77

3.7 Payment system . . . . . . . . . . . . . . . . . . 86

3.8 Information system for reporting to the NationalBank of Moldova . . . . . . . . . . . . . . . . . . 89

1

3.9 Information technology . . . . . . . . . . . . . . 90

3.10 Cash operations . . . . . . . . . . . . . . . . . . . 92

3.11 International Cooperation of the Republic of Moldova 96

3.12 National Bank of Moldova employees and profes-sional development . . . . . . . . . . . . . . . . . 104

3.13 Internal Audit . . . . . . . . . . . . . . . . . . . . 105

3.14 Activity of the Council of Administration of theNational Bank of Moldova . . . . . . . . . . . . . 106

3.15 Completion and amendment ofnormative acts in 2012 . . . . . . . . . . . . . . . 107

3.16 Analysis of financial situation for 2012 . . . . . . 115

A Statistical tables 128

2 Annual Report (NBM, 2012)

List of abbreviations

AIPS Automated Interbank Payment System

BSCEE Group of Banking Supervisors from Central andEastern Europe

CHIBID Average interest rate at which the contributing banksare available to borrow in the interbank moneymarket financial means in Moldovan lei from otherbanks

CHIBOR Average interest rate at which the contributing banksare available to lend in the interbank money marketfinancial means in Moldovan lei to other banks

CIS Commonwealth of Independent States

COREP Prudential reporting standard under the EU CapitalRequirements Directive

CPI Consumer Prices Index

DCFTA Deep and Comprehensive Free Trade Agreementbetween the Republic of Moldova and the EuropeanUnion

DNSS Designated-Time Net Settlement System

EBRD European Bank for Reconstruction and Development

ECF Extended Credit Facility

EFF Extended Fund Facility by IMF

EIB European Investment Bank

EU European Union

EUR European Union Currency

FCC Freely convertible currency

FDI Foreign direct investment

FINREP Financial reporting process

GDP Gross Domestic Product

IBRD International Bank of Reconstruction andDevelopment

CONTENTS 3

IDA International Development Association

IFAD International Fund for Agricultural Development

IFRS International Financial Reporting Standards

IMF International Monetary Fund

IPPI Industrial production price index

IT Information Technology

MDL Moldovan leu

NAER National Agency for Energy Regulation

NBC National Bank Certificates

NBM National Bank of Moldova

NBS National Bureau of Statistics of the Republic ofMoldova

NEA National Employment Agency

REER Real effective exchange rate of the national currency

REPO State securities trading agreement with furtherredemption of the same state securities on a certaindate or upon request at a certain price, fixed on theselling date

RTGS Real-Time Gross Settlement System

RUB Russian ruble

SIRBNM NBM Electronic Reporting System

SB State Bonds

SDR Special Drawing Rights (XDR)

UAH Ukraine Hryvnia

USA The United State of America

USD U.S. dollar

VAT Value added tax

XBRL Extensible Business Reporting Language. The formatof data submission used for the creating and sendingof reports in electronic form.


Summary

The world economy in 2012 combined the problems of theeuro area sovereign debt crisis and fiscal problems of the U.S.,which led to an increased vulnerability of major currencies anda reduction in international trade. Additionally, the decreaseddemand from economies with a significant weight in worldconsumption led to a reduction in international prices of rawmaterials, which is unfavorable for emerging economies andespecially for those significantly dependent on the volume andprice of raw materials exported. The difficulties range wascompleted with strong uncertainties that prevailed in 2012 onthe financial markets, certain events causing severe turbulencethroughout the world.

The Moldovan economy recorded a contraction of 0.8 percentin 2012 compared to 2011, primarily due to the negative devel-opment of the agricultural sector, attributable to a pronounceddrought, and due to a poor domestic demand. At the sametime, the external environment was less favorable, with thecontracting European economy, which resulted in a moderateexternal demand, the exports increasing by only 2.3 percent.Household consumption increased only by 1.0 percent in 2012,the increase being much lower than in 2010 and 2011, due tothe slower growth in disposable income of the population andreduced consumption of goods and services in kind. Generalgovernment final consumption recorded an increase of 0.5 per-cent. Gross capital formation declined by 2.8 percent, drivensolely by the evolution of changes in inventories component.Gross fixed capital formation recorded an increase of 0.4 percent,mostly due to augmented expenditures for capital repairs offixed capital, while the capital investment registered a decline of3.1 percent. The modest growth rate in domestic consumptionand the investment’s contraction led to a lower growth rateof imports of goods and services, so it constituted 2.5 percent.Agriculture declined by 23.3 percent, while gross value addedin industry grew by only 0.5 percent. In 2012, the unemploy-ment rate was 5.6 percent, decreasing by 1.1 percentage points.However, the reduction in the number of unemployed peoplehas not been accompanied by a positive trend in employment.

In 2012, the National Bank of Moldova created the conditionsnecessary to keep the inflation rate within the range of 5.0percent ± 1.5 percentage points, a goal set for 2012 accordingto the National Bank’s monetary policy strategy for 2010-2012.

Summary 5

Thus, in February 2012, the annual inflation rate entered therespective corridor, representing 6.1 percent, and for the monthof December 2012 - 4.1 percent. At the same time, in December2012, the annual inflation rate was by 3.7 percentage pointslower than the 7.8 percent recorded in December 2011. During2012, the annual rate of core inflation has registered a down-ward trend, mainly due to the slowing domestic demand, so itfell from 5.9 percent in January to 3.7 percent in December. Thedry weather conditions in the region, which caused increases infood prices, were the main factors that have exerted inflationarypressures during 2012. At the same time, price increases in theCPI were favored by side effects caused by rises in tariffs in thefall of 2011 and tariff increases in electricity in May 2012. Themain factor that weakened the price increase during 2012 wasa lower aggregate demand than in the previous years due tothe slowdown in the growth of household disposable income.The nominal exchange rate of the national currency against thecurrencies of major trading partners exercised broadly disinfla-tionary pressures in the reporting period.

Quantifying the macroeconomic situation, the trends and projec-tions of macroeconomic indicators in the medium term, the in-flation outlook in the short and medium term on the backgroundof potential risks and uncertainties in the reference period, aswell as to anchor inflationary pressures, the National Bank haspromoted during 2012 an adaptive monetary policy under alow inflation, monitoring and anticipating developments in thedomestic and international economic environments, so thatthrough the flexibility of the operational framework specific tothe inflation targeting strategy, it ensured price stability in themedium term.

Thus, in 2012, the National Bank of Moldova has decided ontwo consecutive reductions of the monetary policy interest rateby 2.0 percentage points. Within the meeting of the Councilof Administration of the NBM on January 26, 2012, after theassessment of the balance of risks associated with the inflationoutlook in the medium term, it was decided to reduce the mon-etary policy rate from 8.5 to 6.5 percent annually. On February23, 2012, due to the persistence of deflationary risks determinedby a potential decrease in the economic activity and domesticdemand, and the continued deterioration of expectations ondevelopments in global economic activity, it has been decidedto further reduce the monetary policy rate by 2.0 percentagepoints, from 6.5 percent to 4.5 percent. Until the end of 2012,the aforementioned rate was not changed, being maintained atthe level of 4.5 percent.

That decision was aimed at anchoring inflation expectations interms of strengthening the prospects of keeping inflation within


the range of variation of ± 1.5 percentage points from the targetof 5.0 percent.

The set of monetary policy instruments used by the NationalBank of Moldova, corresponding to the existent operationalframework, has proved to be still appropriate for monetarypolicy implementation requirements.

Under the influence of increased liquidity excess, the liquidityinjection activity of the NBM in 2012 can be characterized as asecondary one, as the liquidity sterilization operations from themarket, like in 2011, continued to play the main role.

The standing facilities regime (overnight deposits and credits)in 2012 allowed banks to manage their liquidity efficiently andprovided National Bank of Moldova with more flexibility toconduct the monetary policy.

In 2012, the required reserves mechanism continued to exercisethe monetary control function, which is closely correlated withthat of liquidity management by the NBM. Maintaining therequired reserves ratio at the level of 14.0 percent of the basewas explained by the passivity of interbank money market,aiming at improving its quantitative and qualitative indicatorsand at improving the transmission mechanism.

The firm management of liquidity in the banking system aimedat ensuring the proper functioning of the money market, main-taining the balance between price stability and national eco-nomic recovery.

The NBM intervened in the foreign exchange market during2012 as a buyer of foreign currency in order to ensure that theannual inflation rate would fall within the range of variationof ± 1.5 percentage points from the target of 5.0 percent, andin order to strengthen the foreign exchange reserves. Amida relatively low demand of foreign currency from economicagents, the foreign currency excess was generated by a netsupply of foreign currency from individuals and a massive netinflow of foreign loans and investments. At the same time,the increase of the balance of current accounts and deposits inforeign currency of individuals and legal entities contributedto increased liquidity in foreign currency on the domestic for-eign exchange market. In light of these developments, andwithin the limits of the promoted monetary policy, the NBMhas absorbed in 2012 the foreign currency excess by purchasingforeign currency from the interbank foreign exchange marketin the amount of USD 310.1 million.

At the end of 2012, the official reserve assets amounted to USD2515.0 million, increasing by 28.0 percent from the end of 2011,

Summary 7

covering about 4.7 months of imports (in 2011 – 3.6 monthsof imports) and 110.6 percent of the total external debt of theRepublic of Moldova in the short term.

On December 31, 2012, in the Republic of Moldova were 14banks licensed by the National Bank of Moldova, including fourbranches of foreign banks and financial groups. On February 15,2012, the NBM has withdrawn the license to conduct financialactivity of C.B. "Universalbank" S.A.

It should be mentioned that, from January 1, 2012, banks havestarted using the International Financial Reporting Standards(IFRS).

Tier I capital in the banking sector amounted to MDL 6924.0million, decreasing by MDL 473.5 million (6.4 percent) as com-pared to the beginning of 2012. As of December 31, 2012, TierI capital of banks corresponded to the established minimumstandard (≥ MDL 200.0 million), with the exception of twobanks.

The Tier I capital decrease was due to the increase of calculatedamount, but unreserved, of the allowances for impairment losseson assets and conditional commitments by MDL 977.2 millionor by 61.1 percent, which is excluded from the calculation ofTier I. Allowances for impairment losses on assets and condi-tional commitments increased due to the worsening of the loanportfolio quality at some banks.

It should be mentioned that, in accordance with the Regulationon Risk Weighted Capital Adequacy, on December 31, 2012, theamount of minimum capital was set at MDL 200.0 million. Theaverage risk-weighted capital adequacy on December 31, 2012has still maintained at a high level - 24.4 percent, indicatinga high degree of safety of banks, determined by the existenceof a potential for conducting operations without affecting thecapital. However, a bank does not comply with this indicator.

During 2012, the Moldovan banking sector has recorded the fol-lowing trends. The assets under IFRS amounted to MDL 58304.4million, increasing by MDL 9022.4 million (18.3 percent) fromthe beginning of the year. The asset growth was determinedboth by increasing debt to MDL 8414.1 million (21.2 percent)and by increasing capital (IFRS) by MDL 608.3 million (6.3percent). The share of non-performing loans (substandard,doubtful and compromised) in total loans has increased by 1.6percentage points from the beginning of the year, representing14.5 percent on December 31, 2012.

For 2012, the return on assets and return on equity of licensedbanks have recorded the value of 1.1 percent, and 5.6 percent,


respectively, decreasing compared to the end of 2011 by 0.7percentage points and 5.0 percentage points, respectively.

The net interest margin was 5.1 percent on December 31, 2012,decreasing by 1.3 percentage points compared to the end of2011. Long-term liquidity in the banking sector was 0.7 (max-imum 1.0) as on December 31, 2012. Current liquidity in thebanking sector was 32.9 percent (minimum 20.0 percent) at theend of 2012. Both indicators are respected by all banks.

9

Chapter 1

World economy in 2012

The world economy in 2012 combined the problems of theeuro area sovereign debt crisis and fiscal problems of the U.S.,which led to an increased vulnerability of major currencies anda reduction in international trade. Additionally, the decreaseddemand from economies with a significant weight in world

Chart 1.1: The average annual growth ratein world economy (%)

-3.5

3.0

6.1

2.7

7.66.4

5.1

0.1 1.6 1.2

-4

-2

0

2

4

6

8

2008 2009 2010 2011 2012

Advanced economiesEmerging economiesWorld economy

Source: IMF, World Economic Outlook Update – April 2013

consumption led to a reduction in international prices of rawmaterials, which is unfavorable for emerging economies andespecially for those significantly dependent on the volume andprice of raw materials exported. The difficulties range wascompleted with strong uncertainties that prevailed in 2012 onthe financial markets, certain events causing severe turbulencethroughout the world.

After several consecutive downgrades of the forecasts for globaleconomic growth during 2012, the IMF reported an estimativeglobal economic growth in 2012 of 3.2 percent, by 0.8 per-centage points less than in 2011. Advanced economies haverecorded an overall growth of 1.2 percent, while the emergingeconomies grew by 5.1 percent. Both advanced and emergingeconomies recorded the lowest economic growth level since thefinancial crisis of 2008-2009 (Chart 1.1).

Chart 1.2: Average annual growth rate inadvanced economies in 2012 (%)

2.2

0.0

-1.4

0.30.7

2.0

-2.4

-3

-2

-1

0

1

2

3

US

A

Japa

n

Ger

man

y

Fra

nce

Spa

in

Italy

Uni

ted

Kin

gdom

Zona euro (-0.6 %)

Source: Eurostat

The advanced economies have recorded modest growth ratesin 2012, in some cases registering regressions (Chart 1.2). TheU.S. economy has been subject to problems related to fiscalpolicy, reduced private consumption, given the high rate ofunemployment, reduced government spending and decreasedinvestment, given the significant uncertainty regarding theevolution of the U.S. economy that led investors to move tosafer markets. In 2012, the U.S. GDP grew by 2.2 percent.During the analyzed period, the Federal Reserve continued theexpansionary monetary policy, given that inflationary pressureswere declining, the annual inflation accounted for 1.7 percent inDecember 2012. At the same time, the measures taken during2012 led to a decrease in unemployment1 from 8.3 percent inJanuary to the 7.8 percent level in December.

1the U.S. Bureau of Labor Statistics, seasonally adjusted series


The economic situation in the euro area in 2012 was charac-terized by increasing difficulties in the sphere of public deficitsin the southern states, lower demand, higher unemploymentand their consequences that spread to the real sector. Accordingto the data published by Eurostat, real GDP in 2012 for the 17countries of the euro area recorded a contraction of 0.6 percent,due to the unfavorable impact of reduced private consumptionand investment. The external demand has had a positive contri-bution to the growth rate of the economy, causing a slower paceof contraction. The exports rose over four consecutive quarters,although at a lesser extent than in previous years, a trend drivenby the EUR depreciation and by the position of some economies(e.g. Germany) in international competitiveness rankings. Atthe same time, the reduction of consumption had a significantimpact on the volume of imports, which experienced setbacksduring 2012. The unemployment has increased substantially,recording in December 2012 a rate of 10.7 percent in the EUand 11.8 percent in the euro area, varying greatly in membercountries on average from 5.0 to 26.0 percent. Inflation inthe euro area declined gradually during the year, reachingin December 2012 the lowest value in the last two years of2.2 percent. The highest increases were registered in energy,followed by food, tobacco and alcoholic beverages.

Romania

The Romanian economy in 2012 recorded a modest increase of0.7 percent. The National Institute of Statistics notes that thenegative contribution of agriculture has mitigated the growth inthe services sector and the positive impact of net taxes on GDP,while industry and construction recorded a relative halt. Thepace of industrial production showed signs of slowing towardsthe end of 2012. Thus, the industrial production stagnated on

Chart 1.3: Average annual growth rate ofGDP and CPI in Romania (%)

7.3

-6.6-1.1

2.2 0.7

7.9

5.6 6.1 5.8

3.3

-8

-6

-4

-2

0

2

4

6

8

10

2008 2009 2010 2011 2012

GDP CPI

Source: Romania National Institute of Statistics

average in 2012, a situation preceded by years of uninterruptedgrowth. In 2012, the exports recorded negative developmentsand decreased on average by 3.0 percent compared with 2011,while domestic demand in many economies in the euro areadeclined. The unemployment rate in Romania has reachedat the end of 2012 levels similar to those recorded after theeconomic crisis hit in 2009. In addition, starting with the secondhalf of 2012, the unemployment rate dropped below 7.0 percentfor the first time in the last three years. The inflation rate in late2012 was above the range of variation of 1.0 percentage pointsfrom the target of 3.0 percent and reached 5.0 percent annuallyin December 2012 due to significantly higher than expectedfood and energy prices (Chart 1.3).

Russian Federation

In 2012, the Russian economy has experienced the most modestincrease since the beginning of the recovery after the global

Chapter 1. World economy in 2012 11

financial crisis. The gross domestic product rose by 3.4 percentcompared to 4.3 percent in 2011. Private consumption has be- Chart 1.4: Average annual growth rate of

GDP and CPI in Russian Federation (%)

5.2

-7.8

4.5 4.3 3.4

5.1

11.7

8.414.1

6.9

-9

-6

-3

0

3

6

9

12

15

2008 2009 2010 2011 2012GDP CPI

Source: Russian Federal Service of State Statistics

come the main factor stimulating economic growth, supportedby improving labor market and increasing social benefits, whichhave also increased the purchasing power of the population. Atthe same time, the exports of Russian Federation stalled due toa lower demand from the main trading partners, starting withthose from the European Union. Imports, however, showed asignificant increase due to the recovery in domestic demand.The agricultural sector decreased by 3.8 percent in 2012, com-pared to the 14.8 percent growth in 2011, due to the severedrought that destroyed crops in southern and central Russia.The mining sector has registered in 2012 a slight and unevengrowth from one month to another. The increased volatility ofoil prices during 2012 had a negative impact on the Russianeconomy, resulting in a strong fluctuation of RUB parity. InDecember 2012, the price level in Russia was by 6.6 percenthigher than in December 2011, but on average in 2012 theprices increased by 5.1 percent (Chart 1.4).

Ukraine

In 2012, Ukraine’s economy recorded a GDP growth of 0.2percent. The economic growth slightly above zero is due tothe significant advancement of GDP in the first two quartersof 2012, a period when the economic activity was stimulatedby the co-participation of Ukraine in the organization of theEuropean Football Championship, by the fact that the globaleconomic activity was showing only the first tempering signswhile the international prices of raw material and, in particular,of metals were still relatively high. However, in the second half

Chart 1.5: Average annual growth rate ofGDP and CPI in Ukraine (%)

-14.8

4.1 5.2

0.2

2.3 0.6

8.09.415.9

25.2

-20

-10

0

10

20

30

2008 2009 2010 2011 2012

GDP CPI

Source: State Statistics Committee of Ukraine

of 2012, the GDP rate was negative, recording a decrease of1.3 percent in the third quarter of 2012 and 2.5 percent in thefourth quarter of 2012 compared to similar quarters of 2011,indicating that Ukraine’s economy went into recession.

As in many other countries, the economy of Ukraine was in-fluenced during 2012 by the precarious situation of the worldeconomy, which further emphasized domestic economic prob-lems. Political and economic instability in the recent years hascontributed significantly to the reduction of foreign investmentand the deleterious consequences for the economy did not failto appear. Also, Ukraine has recorded an increase in the tax gapin the recent years, due to the delay of cutting social spendingand adjusting natural gas tariff for the population, the fiscal gapincreased to 3.6 percent of GDP in 2012. The drought recordedin July and August 2012 led to a poor harvest, which affectedthe results of the agricultural sector. Exports were negativelyinfluenced by the maintaining stable levels of UAH against theUSD, while the USD has fared extremely volatile during 2012(Chart 1.5).


Overall, the international prices of raw materials have beenfalling in 2012. The reduced global demand, halting transac-tions with certain raw materials in anticipation of clear predic-tions on the evolution of that market, and the reduced growthrate of industrial output in most major economies were thefactors that led the international prices of raw materials to fallin 2012. According to the IMF data, the international prices of

Chart 1.6: Average annual growth rate ofworld price index (%)

-3.1

26.326.1

-30.0

27.6

-45

-30

-15

0

15

30

45

60

2008 2009 2010 2011 2012

Food Energy resources Metal Total

Source: IMF

raw materials fell on average by 3.1 percent in 2012. The globalmetal price index recorded the greatest average reduction of16.8 percent compared to 2011, generated by lower produc-tion rates in most major economies, but also possibly by theprices correction, given that for two consecutive years they haverecorded a robust growth. In 2012, food prices fell on average by1.8 percent compared with 2011. Although it was anticipatedthat food prices will increase because of the severe droughtin the United States, Europe and the Russian Federation, theinternational markets registered a contrary situation, which maybe explained by the existence of food reserves that replenishedthe deficit and, in some cases, the orientation of buyers towardssubstitute products (Chart 1.6).

Urals brand oil price2 recorded in 2012 an increased volatilityranging between USD 93.8 - 122.0 per barrel. During the firstquarter of 2012, the prices showed a rapid increase, beingstimulated by the satisfactory prospects for the global economy.The situation changed in April, when several difficulties facedby the economies have come out, determining the downwardrevision of the macroeconomic forecasts. Thus, from a maxi-mum monthly average recorded in April 2012 of USD 122.0per barrel, the international oil prices have steadily declined,recording the level of USD 93.8 per barrel in June 2012. Startingwith June, the oil prices resumed their upward trend due tothe embargo on oil imports from Iran and due to the increaseddanger of Strait of Hormuz closure. From August to the endof the year, oil prices have stabilized around USD 110 perbarrel. The significant changes in the USD parity, workersstrike, which led to decreased oil production in the North Sea,and the fluctuations of oil production volume in OPEC countrieswere other factors that have contributed to increased volatilityin oil prices during 2012. The average price of Urals oil wasUSD 110.3 per barrel in 2012, increasing slightly by 1.0 percentcompared with the average of 2011 (Chart 1.7).

Chart 1.7: Evolution of natural gas(USD/1000m3) s, i petrol (USD/barrel)

388.3

398.0

398.2399.6

90

100

110

120

130

1/12

2/12

3/12

4/12

5/12

6/12

7/12

8/12

9/12

10/1

2

11/1

2

12/1

2

385

390

395

400

405

Oil (Urals) Natural gas - right scale

Source: Bloomberg, NAER, calcule BNM

Due to the extension for 2012 of the contract clauses for theacquisition of natural gas from the Russian Federation, theaverage purchase price of natural gas was USD 394.03 per 1000m3. In relation to the average price in 2011, this means anincrease of 16.1 percent (Chart 1.7).

2Bloomberg European Urals Northwest Europe Crude Oil Spot Price3NAER Annual Activity Report for 2012

Chapter 1. World economy in 2012 13

During 2012, the parity of international major currencies showedan increased volatility, being strongly influenced by the mac-roeconomic statistics of the economies involved. The USDdepreciated significantly in the second half of the year dueto worsening problems related to fiscal policy, and the resultsunder expectations of the real sector. At the same time, theEUR has been affected by the problems of sovereign debt crisisand related decisions, which subsequently determined the euroarea economy direction. The average parity of the USD againstEUR was 1.29 in 2012, which means the USD appreciated orthe EUR depreciated by 7.6 percent compared with 2011. The

Chart 1.8: Monthly evolution of exchangerates

0.70

0.75

0.80

0.85

0.90

1/12

2/12

3/12

4/12

5/12

6/12

7/12

8/12

9/12

10/1

2

11/1

2

12/1

2

75.0

77.5

80.0

82.5

85.0

EUR/USD JPY/USD - right scale

Source: CEB, Bank of Japan

RUB depreciated significantly against the USD during April -June 2012, due to the reduction in oil price during this periodand due to the dependence of the Russian economy on itsdevelopment. In the second half of the year, the RUB againstUSD has stabilized. During 2012, the RUB depreciated by 5.8percent against USD, recording an average exchange rate of31.1 (Chart 1.8).

Chart 1.9: Average unemployment rate ineuro area and neighboring economies (%)

7.0

5.5

7.5

11.4

5

6

7

8

9

10

11

12

2008 2009 2010 2011 2012

Euro zone Romania Russian Federation Ukraine

Source: State Statistics Committee of Ukraine, RussianFederal Service of State Statistics

Another important feature of the global economy in 2012 wasthe evolution of labor markets of the euro area and neighboringeconomies. The unemployment rate4 in the euro zone has grad-ually worsened, increasing from10.8 percent in January 2012to 11.8 percent in December 2012. The worse situation is inSpain and Greece, where unemployment reached in November2012 the peak of 26.2 percent and 26.6 percent, respectively.There have been also recorded reductions in unemploymentin the region. In Romania, the average unemployment ratefor 2012 was 7.0 percent compared to 7.4 percent recorded in2011. In the Russian Federation the average unemploymentrate decreased during 2012 by 1.0 percentage points comparedto 2011, recording an average value of 5.5 percent. In 2012,the unemployment rate in Ukraine was 7.5 percent (Chart 1.9).

4Eurostat, seasonally adjusted


Chapter 2

The economic situation of theRepublic of Moldova in 2012

2.1 Real sector

Gross Domestic Product

Operational data of the National Bureau of Statistics show thatthe annual growth rate of GDP turned negative in 2012 as aresult of pronounced unfavorable evolution of the agriculturalsector due to the drought, low domestic demand, but also dueto a less favorable external environment, especially contractingEuropean economy, which resulted in a moderate increase inexports. Therefore, the negative effect on the supply side, given

Chart 2.1: Contribution of demand compo-nents to the GDP growth (p.p.)

-0.86.87.1

-6.0

7.8

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

2008 2009 2010 2011 2012

Government and private consumption ImportGross capital formation ExportHousehold consumption of population GDP growth rate (%)

Source: NBS, NBM calculus

the continued demand deficit, caused a contraction of economicactivity by 0.8 percent in the reporting period. The quarterlyevolution of this indicator shows a gradual decrease from 1.0percent in the first quarter of 2012 to the value of minus 2.5percent in the fourth quarter 2012.

In terms of uses (Chart 2.1), the household consumption growth,although recording positive values in 2012, remains much lower(1.0 percent) than the 9.4 percent recorded in 2011. Thisdevelopment was due to the insignificant increase in householddisposable income along with a significant slowdown in theannual growth of the wage bill compared to the previous years,and due to the contraction of consumption of goods and servicesin kind by 4.0 percent, a phenomenon that may be associatedwith the decrease of agricultural production in the mentionedperiod.

Household expenditures for the purchase of goods has increasedby 2.4 percent, while for services – only by 0.5 percent. Gen-eral government final consumption recorded an increase of 0.5percent compared with 2011. Gross capital formation declinedby 2.8 percent, driven solely by the evolution of changes ininventories component. Gross fixed capital formation recordedan increase of 0.4 percent, mostly due to increased expenditures

Chapter 2. The economic situation of the Republic of Moldova in 2012 15

for capital repairs of fixed assets, the capital investment regis-tering a decline of 3.1 percent. Overall, gross capital formationresulted in a negative contribution to the GDP growth, whichwas not reported since 2009.

Economic contraction in the euro area in 2012 resulted in alower external demand for local goods and services, whichresulted in an increase of only 2.3 percent of exports comparedwith 2011, and a tendency to increase the share of CIS countriesin detriment of EU countries within the exports’ structure ofthe Republic of Moldova. The modest growth rate of domesticconsumption and investment contraction depressed the growthrate of imports of goods and services, so it was 2.5 percent in thereporting period. In the fourth quarter 2012, both the annualrate of exports and that of imports turned negative (minus 3.3and minus 1.9 percent respectively).

Chart 2.2: Contribution of economic sectorsto the GDP growth (p.p.)

7.8

-6.0

-0.8

6.87.1

-8-6-4-202468

10

2008 2009 2010 2011 2012

Agriculture IndustryTrade ConstructionsTransport and comunications Other servicesNet taxes on products GDP growth rate (%)


By categories of resources (Chart 2.2), the GDP contraction in2012 was caused by the negative contribution from agriculture,which has registered a sharp drop of 23.3 percent comparedwith 2011, due to the dry weather conditions. Manufacturingand the extractive industry showed insignificant increases (1.0and 2.0 percent, respectively), which may be associated withthe decrease of agricultural production in the first case and themodest growth of the construction sector in the latter case.

On the other hand, the energy industry has contracted by 2.6percent compared with 2011. As a result, the contribution ofindustry to the GDP growth was negligible. Overall, the valueadded of the goods sector decreased by 10.7 percent. Grossvalue added of services recorded an increase of 3.0 percent,mostly due to the evolution of trade, real estate, transport andcommunications, which increased by 4.2, 3.7 and 2.8 percent,respectively. Significant positive contributions were also gener-ated by the financial activities and health and social services,which increased by 3.4 and 3.1 percent compared with 2011. In2012, net taxes on products increased by 1.3 percent comparedwith 2011.

Consumer demand

In 2012, the annual rate of household consumption has in-creased much less in comparison with 2010 and 2011, increas-ing by 1.0 percent, by 8.4 percentage points less than in 2011.

The positive dynamics of household consumption in 2012 wasdriven by the development of expenditure for the procurementof goods and services, which increased by 2.4 and 0.5 percent,respectively, in the reporting period.


However, the positive contributions of the expenditure for theprocurement of goods and services were mitigated by lowerfinal consumption of goods and services in kind (by 4.0 percent).This development can be justified by the reduction of globalagricultural production by 22.4 percent in 2012 compared with2011.

Chart 2.3: Contribution of components(p.p.) to the household final consumptiongrowth (%)

5.8

-8.1

9.2

9.41.0

-10-8-6-4-202468

1012

2008 2009 2010 2011 2012

Consumption of goods and services in kindExpenditures for procurement of servicesExpenditures for procurement of goodsFinal consumption of households


Chart 2.4: Contribution of funding sources(p.p.) to the real growth of household con-sumption (%)

5.8

1.0

9.49.2

-8.1

0.2

-14.4

8.3 7.9

5.6

-20

-16

-12

-8

-4

0

4

8

12

2008 2009 2010 2011 2012

Remittances Payroll fund

Social insurance Loans to individuals

Consumption growth (%) Funding sources increase


In 2012, the annual growth rate of consumption financingsources (Chart 2.4) was 5.6 percent, by 2.3 percentage pointsless than in 2011. It should be mentioned that the annualgrowth rate of funding sources was higher than that of con-sumption in 2012 (situation observed for the first time in thelast five years). The increase in the funding sources on anannual basis by 5.6 percent was mainly supported by the realincrease of remittances by 10.9 percent (which generated acontribution of 3.7 percentage points). However, despite thefact that the increase in remittances denominated in U.S. dollarshas registered in 2012 a more modest increase in annual termsthan in 2011 (in 2012 recorded an increase of 11.9 percent, by9.8 percentage points less than in 2011), its contribution washigher than in 2011 due to the 3.2 percent depreciation of theaverage official exchange rate of the MDL against USD and alower inflation rate than in 2011.

At the same time, the total payroll increased in annual terms by1.8 percent in the reporting period, resulting in a contributionof 0.8 percentage points to the consumption financing sourcesgrowth (a contribution by 3.7 percentage points lower thanin 2011). The evolution of new loans continued to contributepositively to the consumption financing sources growth, itscontribution (0.9 percentage points) being by 0.2 percentagepoints lower than in 2011. Payments related to social insurancerose by 0.9 percent, generating so a minor positive contribution(0.2 percentage points).

Gross capital formation

In 2012, the annual growth rate of gross capital formationturned negative (minus 2.8 percent). The negative dynamicswas determined by the evolution of the changes in inventoriescomponent.

Chart 2.5: Gross fixed capital formation(%, versus the same period of the previousyear)

-40

-30

-20

-10

0

10

20

30

40

50

60

2008 2009 2010 2011 2012Gross fixed capital formation - total

Expenditures for development and procurement programs and databases

Expenditures for capital repairs of fixed assets

Capital investments


Gross fixed capital formation continued the downward trendstarted in 2011, recording a slight increase in annual terms of0.4 percent in 2012 (Chart 2.5). The most significant contribu-tion was generated by the increase of “expenditures for capitalrepairs of fixed assets” (22.2 percent). At the same time, thisincrease was mitigated by the negative developments of thesubcomponents “capital investments” (minus 3.1 percent) and“expenditures for development and procurement of programs


and databases” (minus 1.9 percent). Negative contributions,but less significant, to the gross fixed capital formation weregenerated by the developments of the component “inventoriesof unmounted equipment”, “purchase of books for libraries” and“expenditures for geological works”.

Investment in fixed capital

In 2012, the investments in fixed capital, made by enterprisesand organizations at the expense of all sources of funding,decreased in real terms by 4.1 percent as compared to 2011.

Construction and assembly works in the total investment rep-resented 51.5 percent. Compared with 2011, their volumedecreased in real terms by 1.3 percent.

Chart 2.6: Structure of investments in fixedcapital by funding sources in 2012

3.9%22.4%

58.6%

7.7%

7.4%

Budget sourcesAdministrative-territorial units budgetsMeans of economic agents and population Means of foreign investorsOther sources


The main sources of financing investment activities (Chart 2.6)remain to be the own means of economic agents and population(58.6 percent), which decreased in real terms by 8.7 percentcompared to the same period of the previous year. Duringthe reference period, the share of foreign investors’ funds (7.4percent of total) decreased by 1.5 percentage points comparedto January-December 2011. From budgetary means (both fromthe state budget and from administrative-territorial units), about11.6 percent of total investments was invested in long-termtangible assets.

Within the specific structure of investment in long-term tangi-ble assets, a significant share was directed to the purchase of“equipment, machinery and vehicles”, which constituted 44.0percent of the total volume of investments acquired (down by1.3 percentage points versus 2011). The share of investmentsdirected to the construction of “buildings and edifices” was 31.7percent, decreasing by 3.0 percentage points from 2011.

Within the structure of investment in long-term tangible assetsby ownership, the public ownership businesses held a shareof 37.1 percent, the non-state and mixed sector businessesholding the largest share of 62.9 percent, including businessesand individuals with private ownership - 40.1 percent of totalinvestments, joint ventures and foreign-owned companies - 21.2percent of total investments used in the country.

Industrial production

In 2012, the volume of industrial production in all forms ofproperty has decreased in real terms by 3.1 percent comparedto 2011. It should be mentioned that during 2012 there wererecorded only three months with positive annual growth ratesof industrial production (Chart 2.7). At the same time, the vol-ume of industrial production recorded a pronounced reduction


towards the end of the year. Thus, for the last five months of2012, the average annual rate was minus 6.7 percent.

The decrease in the volume of industrial production, comparedto 2011, was due to lower production volumes in the energyindustry and manufacturing by 4.4 and 3.0 percent, respectively.

Chart 2.7: The evolution of industrial outputin real terms (%, versus the same period ofthe previous year)

-12

-9

-6

-3

0

3

6

9

12

15

18

21

12/1

01/

112/

113/

114/

115/

116/

117/

118/

119/

1110

/11

11/1

112

/11

1/12

2/12

3/12

4/12

5/12

6/12

7/12

8/12

9/12

10/1

211

/12

12/1

2

Source: NBS

The mining industry recorded a minor increase in industrialproduction (0.8 percent). It should be mentioned that themost significant decreases in manufacturing were recorded inthe following industrial activities: “milling products” (by 25.4percent), “processing and preserving of fruits and vegetables”(by 24.4 percent), “clothing” (by 23.9 percent), “tobacco prod-ucts” (by 20.4 percent), “paper and cardboard production” (by19.3 percent), “publishers, polygraph and informative mate-rials reproduction” (by 15.4 percent), “metallurgy” (by 13.9percent), “manufacture of fabricated metal products, exceptmachinery and equipment” (by 13.3 percent), “machinery andequipment production” (by 12.4 percent) and “production ofleather, leather items and footwear” (11.5 percent).

Domestic trade

In 2012, the turnover of enterprises, whose main activity isretail trade, registered a decrease of 0.5 percent compared to2011. However, trade in services grew in annual terms by 3.1percent during January-December 2012.

Chart 2.8: The evolution of domestic trade(%, versus the same period of the previousyear)

-16

-12

-8

-4

0

4

8

12

16

20

24

12/11 2/12 4/12 6/12 8/12 10/12 12/12

Trade with goods Trade with services


It should be mentioned that during 2012, the annual rate ofthe volume of turnover of retail trade fluctuated around zero,recording in December a pronounced decline of 12.4 percent(Chart 2.8). At the same time, the annual trade volume ofservices provided to the population registered a different devel-opment than that of the retail trade. Thus, the annual rate ofthe volume of trade in services was mostly positive.

Foreign trade

During 2012, both the annual pace of exports and that ofimports recorded a downward trend, showing clear signs ofa slowdown in the economic activity of the Republic of Moldova.It should be mentioned that the annual rate of exports declinedfrom 9.8 percent in January to minus 14.1 percent in December,and that of imports from 19.0 percent in the first month of the

Chart 2.9: The evolution in real terms offoreign trade (%, versus the same period ofthe previous year)

-20

-10

0

10

20

30

40

50

60

70

80

12/1

01/

112/

113/

114/

115/

116/

117/

118/

119/

1110

/11

11/1

112

/11

1/12

2/12

3/12

4/12

5/12

6/12

7/12

8/12

9/12

10/1

211

/12

12/1

2

Export Import

Source: NBS

year to minus 5.7 percent in December (Chart 2.9).

In 2012, compared with 2011, the exports of goods decreasedby 2.5 percent, due to lower exports of goods to EU countriesby 6.4 percent. However, the exports oriented towards CIS andother countries increased by 0.9 and 2.7 percent, respectively.


The slowdown in the economic activity of the euro area and theworsening sovereign debt problem, which disrupted the activityin some countries, were the main factors that influenced theforeign demand for domestic products during this period. Theimports of foreign products in 2012 grew by only 0.4 percentcompared with 2011.

The coverage rate of imports with exports in 2012 was 41.5percent compared to 2011, when it recorded the value of 42.7percent.

Transport of goods

In 2012, the enterprises of railway, road, river and airway trans-port have carried goods by 2.9 percent less as compared to 2011.This decrease was recorded as a result of lower volume of goodstransported by railway (by 9.5 percent), driven primarily by areduced volume of “cereals and bakery products” transported.

Chart 2.10: Volume of transported goods(%, versus the same period of the previousyear)

-40

-30

-20

-10

0

10

20

30

40

50

60

70

12/1

01/

112/

113/

114/

115/

116/

117/

118/

119/

1110

/11

11/1

112

/11

1/12

2/12

3/12

4/12

5/12

6/12

7/12

8/12

9/12

10/1

211

/12

12/1

2

Source: NBS

During 2012, the annual growth rate of the annual volume oftransported goods was both negative and positive (Chart 2.10).Thus, the annual growth rate in April-July 2012 was supportedby the increase of goods transported by vehicles, due to thepronounced growth rates in the extractive industry.

At the same time, the volume of goods transported in the fourthquarter of 2012 decreased by 3.5 percent as compared to thefourth quarter of 2011. At the end of the year the contractionwas more pronounced, so that in December 2012 the volumeof transported goods decreased by 18.6 percent compared withthe same month of 2011. This evolution has been determinedby the decreasing volume of goods transported by all means oftransportation, except the river transport.

Agricultural production

In 2012, the agricultural production fell by 22.4 percent com-pared to 2011 (Chart 2.11). This development was due tothe decrease in crop production by 32.6 percent. At the sametime, the volume of livestock production has decreased moremoderately (1.1 percent).

Chart 2.11: Global agricultural production(%, versus the previous year)

-25-20-15-10-505

101520253035

2007 2008 2009 2010 2011 2012

Source: NBS

The decrease in livestock production is due to the decrease inthe production of “milk” and “eggs” by 5.3 and 9.7 percent,respectively. At the same time, the significant negative influenceon crop production was generated by a lower physical volumeof all crops due to dry weather conditions. Thus, the harvestof corn, potatoes, wheat and vegetables has decreased by 61.0,48.1, 37.8 and 36.7 percent, respectively, in the reporting pe-riod.


Labor market

Work force

In 2012, the unemployment rate was 5.6 percent, by 1.1 per-centage points less than in 2011 (Chart 2.12). However, thereduction of the number of unemployed people has not beenaccompanied by a positive trend in employment. Contrariwise,it decreased by 2.3 percent, which resulted in a lowering ofthe employment rate to the level of 38.4 percent (versus 39.4percent in 2011). As a result, there is a contraction of the

Chart 2.12: Evolution of unemployment andemployment (%)

30

35

40

45

50

55

2004 2005 2006 2007 2008 2009 2010 2011 20123

4

5

6

7

8

9

Employment rate Unemployment rate (right scale)


economically active population by 3.4 percent (Chart 2.13). Apart of it became part of the component “discouraged people infinding a job”, which in 2012 amounted to about 27 400 peoplecompared to 25 700 people in 2011.

Chart 2.13: Active and employed population(%, versus the previous year)

-6

-5

-4

-3

-2

-1

0

1

2

3

2004 2005 2006 2007 2008 2009 2010 2011 2012

Active population Employed population


Chart 2.14: Distribution of persons em-ployed by the activities of national economy(%, versus the previou year)

-15

-10

-5

0

5

Agr

icul

ture

Indu

stry

Con

stru

ctio

ns

Tra

de

Tra

nspo

rt a

ndco

mm

unic

atio

ns

Soc

ial s

ervi

ces

Oth

er a

ctiv

ities

2009 2010 2011 2012

Source: NBS, NBM calculus*except „other activities with collective, social and personalservices”

In 2012, the number of dismissed people decreased by 8.0percent compared to the average of 2011 and the number ofvacancies identified by the NEA5 has increased by 21.4 percentcompare to the period of January to December 2011.

In distribution of the national economy, the highest concentra-tion of employment was registered in the agricultural sector, itsshare in 2012 accounted for 26.5 percent. Agriculture and trade(minus 6.1 percent), industry (minus 1.5) and social services(minus 1.2 percent) are the main sectors where the employmentdeclined, due to the continued economic slowdown in theseactivities (Chart 2.14). The most noticeable increases comparedto 2011 were recorded for the following sectors: “constructions”,“transport and communications” and “other activities”. The“constructions” and “transport and communications” are thesectors with the lowest concentration of employment, theirshare was 6.1 percent each.

Wages

According to the National Bureau of Statistics, the average wageof a worker in the national economy in 2012 amounted toMDL 3477.7, increasing in nominal terms by 8.9 percent, ascompared to 2011, and in real terms – by 4.1 percent.

During the reporting period, the annual average real wagegrowth in public administration has been positive (after twoyears of negative values), reaching the level of 14.5 percent,due to the increases of the salaries of public employees onaverage by 12.5 percent on April 1, 2012. The annual growthof real average wages in the trade sector was 4.0 percent, lowerby 3.8 percentage points as compared to 2011. On one hand,compared with 2011, the annual average real wage growth in

5National Employment Agency


the agricultural sector declined amid decreasing agriculturalproduction, which resulted in a reduction in the number of thoseinvolved in the sector, and on the other hand, the wage bill in-creased, thus the annual average real wage growth was positive(6.7 percent). The constructions sector has outlined an unfa-

Chart 2.15: Real average wage * (%, versusthe previous year)

-15

-10

-5

0

5

10

15

20

25

30

2008 2009 2010 2011 2012

Total economy AgricultureConstruction TradeFinancial activities Public administrationEducation

Source: NBS, NBM calculus*deflated by CPI

Chart 2.16: Real average wage in industry(%, versus the previous year)

0

1

2

3

4

5

6

7

2008 2009 2010 2011 2012-20

-15

-10

-5

0

5

10

15

Industry Labor productivity in industry (right scale)


vorable perspective determined by the decrease in constructionactivity, which has reduced the number of employees, but witha greater share than the wage bill reduction, determining anannual growth rate of average real wage of 4.7 percent. Wagesreceived by employees of educational institutions recorded anannual growth of 3.1 percent in real terms compared with 2011,but this increase was much smaller than in 2011. It should bementioned that the education sector holds the most employees(18.4 percent of total). The nominal wage in the financialactivities area is the largest in the economy, but in 2012 ithad a negative real annual growth rate, recoding the level ofminus 0.9 percent. In the last three years, the average annualgrowth of real wages in the industrial sector varies around 2.0percent. In 2012, the labor productivity in industry decreasedby 1.4 percent in annual terms, which resulted in the decreaseof industrial production by 3.1 percent from 2011.

2.2 Inflation

Consumer price index

In 2012, the National Bank of Moldova has created the necessaryconditions to keep the inflation rate within the range of 5.0percent ± 1.5 percentage points, an objective set for 2012according to National Bank’s monetary policy strategy for 2010-2012.

Chart 2.17: The annual rate of CPI and coreinflation (%)

0

1

2

3

4

5

6

7

8

9

10

12/0

9

2/10

4/10

6/10

8/10

10/1

0

12/1

0

2/11

4/11

6/11

8/11

10/1

1

12/1

1

2/12

4/12

6/12

8/12

10/1

2

12/1

2

CPI Core inflation Inflation target


Thus, in February 2012, the annual inflation rate entered therespective corridor. In the first half of 2012, the annual inflationcontinued the downward trend, reaching in April the lowerband of the above-mentioned range and in June it registeredthe lowest value of 3.7 percent, by 0.2 percentage points abovethe lowert limit thereof.

Later, due to the monetary policy measures undertaken in late2011 - early 2012 and the summer of 2012, it was possibleto keep the annual inflation in the range of 5.0 percent ± 1.5percentage point, the annual rate increasing to 4.9 percent inSeptember. In the fourth quarter of 2012, the average annualinflation rate had a downward trend, constituting 3.9 percent.This development was driven by the effect of a high base perioddue to increases in the tariffs of gas and heating in October and


November 2011. However, towards the end of the year, theannual rate had increased, so its value in December was 4.1percent, by 0.4 percentage points higher than in November. Atthe same time, in December 2012 the annual inflation rate wasby 3.7 percentage points lower than the 7.8 percent recorded inDecember 2011.

Chart 2.18: The annual rate of inflationsubcomponents (%)

-4-202468

1012141618202224

12/0

9

2/10

4/10

6/10

8/10

10/1

0

12/1

0

2/11

4/11

6/11

8/11

10/1

1

12/1

1

2/12

4/12

6/12

8/12

10/1

2

12/1

2

Foodstuff products prices Regulated prices Fuel prices


The dry weather conditions in the region, which have causedthe increase in food prices, were the main factors that haveexerted inflationary pressures during 2012. At the same time,the price increase in the CPI was favored by the side effectscaused by increases in tariffs in the fall of 2011 and the increasein electricity tariffs in May 2012.

The main factor that weakened the price increase during 2012was a lower aggregate demand than previous years due to theslowdown in the growth of household disposable income. Atthe same time, the nominal exchange rate of the national cur-rency against the currencies of major trading partners exercised,overall, disinflationary pressures in the reference period.

In the components structure, food prices (by 5.4 percent) record-ed the largest increase in December 2012 compared to Decem-ber 2011, followed by non-food products (3.6 percent) andservices (by 3.0 percent).

Chart 2.19: The dynamics of annual infla-tion and subcomponents contribution (p.p.)

0

1

2

3

4

5

6

7

8

12/11 2/12 4/12 6/12 8/12 10/12 12/12

Foodstuff products Regulated pricesFuel prices Core inflationCPI (contrib. sum of comp.)


The food prices (1.9 percentage points) had the largest contribu-tion to the annual inflation rate formation in December 2012, asa result of unfavorable weather conditions in the region (Chart2.19). Prices for goods and services related to core inflationhave had a contribution of 1.1 percentage points, as a result ofhigher prices of raw materials, the second round effects due tohigher food prices, increased tariffs, but also due to increasedexcise duties on cigarettes. Prices for regulated services had acontribution of 0.7 percentage points, mostly due to a higherelectricity tariff in May 2012. Fuel prices have generated thelowest contribution (0.3 percent) to the inflation dynamics inDecember 2012.

Core inflation index

During 2012, the annual rate of core inflation has registered adownward trend, mainly due to the slowing domestic demand,so it fell from 5.9 percent in January to 3.6 percent in September.Towards the end of 2012, the annual rate of core inflationshowed a relatively stable trajectory, representing 3.7 percentin December 2012.

By groups of goods and services, core inflation increased inDecember 2012 compared to December 2011 mainly due to


higher prices of clothing, footwear and tobacco by 4.3, 3.4 and18.6 percent, respectively. The increases in the components“public alimentation” (by 3.9 percent), “building materials” (by2.9 percent), “education and training” (by 7.1 percent) and“knitwear” (by 4.5 percent) had also significant contributions,but of lower intensity (Chart 2.20).

Chart 2.20: Subcomponents contributionto the annual growth rate of core inflation(p.p.)

0

1

2

3

4

5

6

7

12/11 1/12 2/12 3/12 4/12 5/12 6/12 7/12 8/12 9/12 10/12 11/12 12/12Personal accessories Household itemsSanitation, hygiene and cosmetics items OthersCultural services CigarettesEducation and learning ClothingKnitwear FootwearAuto parts, bicycles DetergentsPublic alimentation Construction materialsCore inflation (sum of comp.)


These price increases were a consequence of changes in exciseduty on tobacco products operated in early 2012, side effectsof the increase in utility tariffs, fuel and food prices. Sincethe beginning of 2012, the pressures from clothing prices havestarted to increase, reaching their peak in August, so the clothingprice increment was largely the result of higher energy andraw material prices: cotton, leather and fur on the interna-tional markets during the years 2011-2012. In early 2012, thepressures from building materials prices were high, which wasdetermined by the favorable base effect in the correspondingperiod of 2011, but towards the end of the year these pressuresdropped considerably.

Food prices

The evolution of food prices during 2012 was characterized bya steady decline in the annual rate in the first half of the year(from 5.0 percent in January to 0.8 percent in June). However,the annual rate has accelerated later, recording an increase of5.4 percent in December 2012.

Chart 2.21: Components contribution to theannual growth of food prices (p.p.)

-4

-2

0

2

4

6

8

12/11 2/12 4/12 6/12 8/12 10/12 12/12Flour-milling products RiceVegetables PotatoesFresh fruits Vegetable oilMeat and meat products Fish and fish productsMilk and dairy products ButterEggs SugarAlcoholic drinks Non-alcoholic beveragesOthers Foodstuff products (contr. sum)


The downward trend recorded in the first half of the yearwas mostly due to lower prices of potatoes, attributable toan oversupply of this product in 2011, and the orientation ofvery small quantities towards export. However, the negativeimpact of the group “potatoes” was diminished by the priceincrease of “meat and meat products”, “eggs”, “milk and dairyproducts”, and “milling and baking products” (Chart 2.21) .

The price increase of meat and meat products is explained bythe increase in raw material prices as a result of lower domesticsupply due to the domestic production orientation towardsforeign markets. The price increase of milk and milk productswas determined by the reduced milk production in householdsof all categories in the first half of 2012. It should be mentionedthat the prices of the above-mentioned products have beeninfluenced by the impact of side effects of gas price increases,carried out in October 2011, which affected production costs.

As mentioned above, in the third quarter of 2012, the evolutionof the annual rate of food price inflation recorded a changeof direction, which was caused by dry weather conditions inthe summer of 2012. The effects of drought were seen both in


the summer of 2012 and thereafter. Thus, the increase of foodprices in annual terms in December 2012 was driven mainlyby higher prices of “vegetables”, “meat and meat products”,“milk and dairy products”, “milling and bakery products”, and“fresh fruit”. At the same time, the drought in the summer of2012 contributed to a significant reduction of potato production,which reduced the negative impact of this subcomponent onfood price inflation.

World food prices fell by 7.0 percent in 2012 and in this waythey have mitigated, to some extent, the rise in food pricesdomestically.

Regulated prices

During 2012, the regulated prices pressures on the evolution ofthe CPI eased so that the annual rate of regulated prices equaled8.1 percent in the first quarter of 2012, decreasing to a valueof 2.7 percent in the fourth quarter of 2012. This was drivenby the gradual elimination of positive contributions from tariffsadjustments of the subcomponents “network gas” and “centralheating” in the fall of 2011 (Chart 2.22).

Chart 2.22: Components contribution to theannual growth of regulated prices (p.p.)

-2

0

2

4

6

8

10

12/11 2/12 4/12 6/12 8/12 10/12 12/12Payment for housing Expenditures for maintenance of dwellingsElectricity Health protection servicesTransport services Natural gasCentral heating Distance communication servicesMedicines Postal servicesRitual services Services of lowyers and judgesRegulated prices


The increase in regulated prices in the fourth quarter 2012compared to the same period of 2011 primarily reflects theincreases in electricity tariff in May 2012, the expenses related tothe house maintenance, especially water and sewerage serviceconducted in May and November 2012. In this way, the newlyadopted tariff determined the increase in the electricity prices by7.3 percent in December 2012. These developments, along withrising prices of rental services, drinking water and sanitationby 3.0 and 15.2 percent, respectively, determined the publicutilities to increase overall by 3.6 percent in December 2012compared to the same month of 2011. The tariffs for healthservices, medications, railway and airway passenger transportincreased by 6.8, 1.4, 13.1, and 40.7 percent, respectively, butthe impact of these developments was less significant on thedynamics of regulated prices.

Fuel prices

The developments of fuel prices during 2012 registered anupward trend in the first quarter, recording later a steady declinein the annual rate, with a slight stabilization at around 5.0percent in the fourth quarter of 2012. It should be mentionedthat since January the fuel price structure has included a newcomponent - “firewood”.

Chart 2.23 shows a pronounced increase in the contributionfrom the component “bottled gas” in the first half of the year.


Thus, this development was due to the introduction in 2012 of ashare of excise in the amount of MDL 1800 per ton. At the sametime, the acceleration of the annual rate in the first quarter of2012 was due to the increasing contribution from combustible,given the rise in international oil prices during this period, andthe increase rate of excise duty on petrol and diesel by about6.8 percent.

After the acceleration recorded in the first months of the year,the annual rate registered a steady decline. This developmentwas mainly due to the reduction in international oil prices(in June, the Urals brand oil price was USD 93.8 per barrel,by USD 28.3 per barrel less than the level recorded in March2012), which drove down the pump price of petrol and diesel.During 2012, the contribution from the component “earth coal”recorded a steady decrease. This was due to lower prices ofextracting coal from Ukraine (the main regional producer),which made the import price to lower.

Chart 2.23: Components contribution to theannual growth of fuel price (p.p.)

-10123456789

1011

12/11 2/12 4/12 6/12 8/12 10/12 12/12

Bottle gas Earth coal Fuel

Firewood Fuel prices


In the fourth quarter of 2012, a substantial change in the contri-bution structure of fuel prices components has been recorded.Thus, during the quarter, the contribution from the component“firewood” has recorded a steady increase. As a result, therespective component’s contribution to the formation of theannual rate of fuel prices has become the largest in December2012 (Chart 2.23). At the same time, the contribution fromcoal was negative in December 2012 (the last time a negativecontribution from this component was noticed in June 2010).Given that oil prices had a slightly downward trend in the fourthquarter of 2012 (decreasing by 2.4 percent in December 2012compared with September 2012), and the national currency hasslightly appreciated against USD (by 1.8 percent in December2012 compared to September 2012), there were created precon-ditions for market operators to reduce the pump price of fuel atthe beginning of the second decade of November 2012.

Industrial production price index

In 2012, the annual rate of industrial production price indexrecorded a downward trend, decreasing from 10.4 percent inJanuary to the 4.5 percent value in December (Chart 2.24).Within the structure, in December 2012, the largest increases

Chart 2.24: Annual rate of IPPI (%)

3

4

5

6

7

8

9

10

11

12/1

0

2/11

4/11

6/11

8/11

10/1

1

12/1

1

2/12

4/12

6/12

8/12

10/1

2

12/1

2

Source: NBS

were recorded in the prices of the extractive industry, whichrose by 10.6 percent compared to December 2011, while theprices of energy and manufacturing industries recorded moremodest increases of 4.9 and 4.3 percent, respectively.

In manufacturing, the most significant increases in December2012 were recorded for the production costs of the followingcomponents: wood processing (8.6 percent), production of


medical equipment and instruments (8.6 percent), apparel man-ufacturing (6.1 percent), footwear manufacturing (7.1 percent),and leather manufacturing (6.3 percent). These increases weremitigated by lower prices for the production of electrical ma-chinery (15.4 percent), tobacco products (7.6 percent), textileproducts (6.5 percent), publishing and printing (5.6 percent).

Construction prices

In the first nine months of 2012, the annual construction pricesrecorded an upward trend, increasing from 9.3 percent in thefourth quarter of 2011 to 11.3 percent in the third quarter of2012. At the end of the year, this trend that began in the secondhalf of 2010 has been discontinued, so their annual rate showeda pronounced decrease to a value of 8.7 percent (Chart 2.25).

Chart 2.25: Evolution of construction priceindex (%, versus the same period of theprevious year)

-2

0

2

4

6

8

10

12

I/10 III/10 I/11 III/11 I/12 III/12

Source: NBS

In the national economy structure, the following sectors haverecorded the largest increases in the fourth quarter of 2012 ascompared with the fourth quarter of 2011: “telecommunica-tions” (by 14.2 percent), “transport” (by 12.0 percent), “tradeand public alimentation” (by 11.1 percent), “electric power” (by9.7 percent), “the construction of social and cultural objects”(by 9.3 percent), and “manufacturing” (by 9.2 percent).

2.3 Public sector

The year of 2012 was a difficult one for the national econ-omy against the backdrop of adverse weather conditions in thesummer that had a negative impact on the agricultural sector,ultimately affecting the country’s economic growth. However,the national public budget indicators confirm a more efficienttax administration, as government revenue has increased andthe budget deficit was within acceptable limits.

Chart 2.26: The national public budget indi-cators

-30

-20

-10

0

10

20

30

I/09

II/09

III/0

9

IV/0

9

I/10

II/10

III/1

0

IV10 I/11

II/11

III/1

1

IV/1

1

I/12

II/12

III/1

2

IV/1

2

%

-1200

-600

0

600

1200million MDL

Deficit (right scale) Incomes Expenditures

Source: Ministry of Finance, NBM calculus

According to the information provided by the Ministry of Fi-nance, the dynamics of the national budget revenue collectionwas MDL 33526.1 million in January-December 2012, recordinga slight increase in annual growth rates of up to 11.2 percentcompared to 9.5 percent recorded in 2011 (Chart 2.26).

The ratio of tax revenue to the preliminary GDP data increasedin 2012 by 1.6 percentage points compared to 2011, and ac-counted for 38.2 percent.

Similarly to the previous periods, tax revenues have held themajor share of 86.1 percent in the public revenues, by 1.2percentage points more than in 2011 (Chart 2.27). In 2012, the


revenues from VAT increased by 2.0 percent and the revenuesfrom excise duties by 8.5 percent, which was less comparedto the increases recorded in 2011 of 14.4 and 28.6 percent,respectively.

Although the components growth was tempered, there has beenrecorded a further dependence of public budget revenues onhouseholds’ consumption, the indirect taxes accounted for 54.1percent of total tax revenues. The share of direct taxes increasedby 3.5 percentage points in 2012, up to 45.9 percent, drivenmainly by the increase in income taxes contribution (up by 70.6percent), due to the reintroduction of corporate income tax.Social payments (mandatory social insurance contributions andthe health insurance premiums) increased on average by 8.8percent.

Chart 2.27: The dynamic of tax revenues’structure

0%

20%

40%

60%

80%

100%

2008 2009 2010 2011 2012

Income taxes Property taxes Social payments

VAT Excise Other tax revenues


Chart 2.28: Sectoral distribution of publicexpenditure

0%

20%

40%

60%

80%

100%

2008 2009 2010 2011 2012Administrative expenditures Economic expenditures

State debt service Socio-cultural programs

Other expenditures


Chart 2.29: The evolution of public budgetdeficit

-2.5 -2.4 -2.1-1.0-6.3

-20

-15

-10

-5

0

5

10

15

20

2008 2009 2010 2011 2012

%

-4000

-3000

-2000

-1000

0

1000

2000

3000

4000million MDL

Deficit (right scale) Incomes

Expenditures Deficit to GDP


During the reporting year, the Republic of Moldova has receivedfinancial support for the state budget in the form of externalgrants, totaling MDL 1582.7 million or by 4.7 percent less thanin 2011 and internal grants, totaling MDL 54.1 million (by25.8 percent more than in 2011). The assistance provided byinternational financial organizations and donor countries is animportant contribution to the economic recovery and reformsneeded to modernize and re-launch the Republic of Moldova.

General government expenditure in the period of January-December 2012 had an upward trend, recording an annualgrowth of 10.1 percent compared to that of 2011 (9.5 percent),reaching the value of MDL 35364.0 million. The increase in thevolume of expenditure was mainly due to higher spending ontransport, road management, communications and informatics(by 42.6 percent), health (11.5 percent), and education (by 7.7percent) etc.

Within the structure of expenditure, the social and culturalprograms received the most resources - 69.6 percent of the total,although their share has decreased by 1.9 percentage pointscompared to 2011 (Chart 2.28). During the reporting period,the most significant change was recorded in the expenditurerelated to the national economy - 13.0 percent, which increasedby 2.2 percentage points from 2011. Other significant expenseswere related to the administrative sectors - 12.1 percent, whichare designated for sectors such as state services with specialpurpose, justice, national defense etc.

The ratio of public expenditure to the preliminary GDP data was40.3 percent in 2012, by 1.3 percentage points more than in2011.

Although the economic activity in the Republic of Moldova in2012 was reduced, the major components of the national public


budget, both revenue and expenditure, have recorded higherannual growth rates. Thus, in January-December 2012, theconsolidated public budget execution resulted in a deficit ofMDL 1837.9 million, down by 6.2 percent annually. The ratioof this deficit to the preliminary GDP data was 2.1 percent orby 0.3 percentage points less than in 2011 (Chart 2.29).

At the end of 2012, the debt of the Republic of Moldova wasMDL 21184.7 million, increasing by MDL 1958.2 million orby 10.2 percent compared to the beginning of the year. Thedebt consisted of the external state debt - 70.9 percent anddomestic state debt - 29.1 percent. In 2012, the balance ofexternal debt denominated in foreign currency increased by USD103.1 million, representing at the end of the reporting periodthe amount of USD 1245.6 million. The external state debthas also increased as value expressed in MDL by 12.3 percent,totaling MDL 15025.8 million at the end of December 2012. Thedomestic state debt recorded the value of MDL 6158.9 millionand exceeded the value recorded at the beginning of the yearby MDL 317.0 million, equivalent to an increase of 5.4 percent.This debt component was composed of SS issued in the primary

Chart 2.30: The state debt as a share inGDP (%)

5.58.4 7.4 7.1 7.0

12.9

15.8 18.916.3 17.1

18.4

24.226.3

23.4 24.1

0

10

20

30

31/12/2008 31/12/2009 31/12/2010 31/12/2011 31/12/2012

Internal public debt External public debt Public debt

Source: NBM

market in the amount of MDL 3816.1 million, converted SS- MDL 2063.4 million and SS for ensuring financial stability -MDL 279.4 million. In 2012, for the state debt service was usedfrom the national budget the amount of MDL 666.4 million(by 0.6 percent more than in 2011), out of which 73.5 percentwere used for domestic debt and 26.5 percent of resources forexternal debt.

At the end of 2012, public debt as a share of GDP was 24.1percent, by 0.7 percentage points higher than in 2011. Thisincrement was driven by an increase in thr external debt by0.8 percentage points, up to 17.1 percent while the share of7.0 percent of the domestic debt has changed slightly, by 0.1percentage points less than in 2011 (Chart 2.30).

2.4 The evolution of the external sectorof national economy

The external sector of the national economy during 2012 wasinfluenced by both endogenous and exogenous factors. Thefrosts in the winter of 2012 and the summer drought, whichaffected the agriculture, have influenced foreign trade, alongwith contracting demand in European countries and decreasingglobal food prices and increasing global prices for petroleumproducts.


The current account of the balance of payments recorded adecreasing deficit by 35.4 percent compared to 2011 - USD510.87 million, which represents a ratio of 7.0 percent to GDP(Table A.1, Chart 2.31).

The current transactions deficit decrease was driven by highernet revenues (both from the increase in net inflows from re-mittances and from the decrease of net investment incomepayments).

The growing surplus in income and current transfers coveredthe trade deficit in goods and services at a rate of 82.7 percent.

The volume of foreign trade in goods and services reached thelevel of USD 9273.86 million, the imports being covered byexports at a rate of 51.8 percent. The foreign trade deficit ingoods and services has increased by 2.6 percent compared with2011, representing USD 2945.26 million.

According to the NBS statistics6, while the trade deficit withthe EU countries increased, the trade deficit with CIS countriesdecreased. Exports of goods to EU countries fell by 6.4 percent,

Chart 2.31: Current acount - main compo-nents (milllion, USD)

-972.81-446.70 -448.99

-790.37-510.87

-3600-3000-2400-1800-1200-600

0600

1200180024003000

2008 2009 2010 2011 2012

Goods ServicesIncomes Current transfersCurrent account

Source: NBM

the reduction referring both to exports of processed goods andother goods. The reduction of trade deficit with CIS countrieswas driven by lower imports by 5.1 percent. The volume of trade

Chart 2.32: Main trading partners of theRepublic of Moldova in 2012 (milllion, USD)

Exportul of goods from the Republic of Moldova

654.98

356.73

122.40

202.37

70.19

56.12

8.30

80.73

74.19

28.75 136.48

172.07

168.22

260.77

376.24

415.67

285.59

749.16

898.84

741.48

9006003000300600900

Hungary

Poland

Belarus

China

Turkey

Germany

Italy

Ukraine

Romania

Russian Federation

Import of goods into Republic of Moldova

Source: NBM

in goods with the main partners of the Republic of Moldova isshown in Chart 2.32.

The main markets for goods from the Republic of Moldovaremained to be Russia, Romania, Italy, Ukraine, the UnitedKingdom, Belarus, Poland, Germany, Turkey and Kazakhstan.

In terms of the structure by type of goods, the exports of theRepublic of Moldova were marked by a decrease of 4.2 percentof exports of agri-food products, the vegetable exports being themost affected by the adverse weather conditions.

At the same time, the exports of alcoholic beverages increasedby 18.5 percent compared with 2011. The agri-food productsheld a share of 40.7 percent in the structure of exports - USD878.91 million, of which: alcoholic beverages - USD 210.65million (of which wine from fresh grapes - USD 142.11 million);edible fruits and nuts - USD 202.32 million; seeds and oilseeds- USD 99.89 million (down by 45.0 percent compared with2011); sunflower seed oil - USD 80.73 million; preparations

6The NBS data do not include the adjustments to the foreign trade withgoods operated by the Balance of Payments Division of the National Bankof Moldova, such as exports/imports conducted by individuals, repairs ongoods, goods procured in ports by carriers, etc. Imports are valued in c.i.f.prices, their distribution by countries being done by the principle of countryof delivery.


of vegetables, fruit, nuts or other parts of plants - USD 60.38million; cereals - USD 36.51 million (down by 49.3 percent).Other exported goods were: textiles and articles thereof - USD343.34 million; machinery and equipment - USD 278.60 million(including wires, cables and other electrical conductors - USD166.97 million); medicines - USD 93.40 million, furniture -USD 87.58 million, base metals and articles thereof - USD 73.39million etc.

As in 2011, re-exports of goods of foreign origin or that un-dergone insignificant changes accounted for about a quarterof total exports of goods (25.9 percent of total exports, by0.9 percentage points more compared with 2011). Exports ofprocessed goods constituted 24.3 percent of total exports.

In 2012, the main suppliers of goods to the Republic of Moldovawere Romania, Ukraine, Russia, Germany, Turkey, Italy, China,Poland, Belarus and Hungary.

Within the structure of imports, the mineral products held thelargest share - 23.4 percent. Of these, more than 90.0 percent

Chart 2.33: The annual dynamics of en-ergy and electricity products imports (mil-lion, USD, f.o.b. prices)

0100200300400500600700800900

10001100

2008 2009 2010 2011 2012Natural gas Diesel fuel Gasoline

Others Coal Electricity

Source: NBM

are imports of energy and electricity products, which increasedby 0.8 percent compared with 2011 (Chart 2.33). Importsof petroleum oils or oils obtained from bituminous mineralsaccounted for USD 584.82 million, oil gas and other gaseoushydrocarbons - USD 496.47 million. The physical volume ofimported natural gas declined by 4.9 percent, while its valueincreased by 10.4 percent, due to rising prices.

Electricity was imported in quantities of 845.72 million kWhfrom Ukraine.

Among other categories of goods with significant shares in totalimports were: machinery and appliances - USD 786.45 million,agri-food products - USD 743.32 million; chemical products -USD 558.16 million; textile materials and articles thereof - USD384.76 million, base metals and articles thereof - USD 284.47million; ground vehicles - USD 275.10 million; plastics andarticles thereof - USD 220.16 million.

Chart 2.34: Structure of imports of goodsby major economic categories in 2012

Intermediate goods46.9%

Consumer goods28.6%

Capital goods11.1%

Omitted*13.4%

Source: NBM*vehicules for passagers transport, fuel for these, other goodsnot specified elsewhere

According to the classification by Broad Economic Categories,intermediate goods used in the manufacturing of other goodsheld the 46.9 percent of all imports (+0.5 percentage pointscompared with 2011), consumer goods - 28.6 percent (up by 1.3percentage points), capital goods - 11.1 percent (-0.5 percentagepoints) (Chart 2.34).

In 2012, the services balance recorded an increase in its deficitby 8.1 times, determined by the augmented travel deficit anddecreased surplus of computer and information services and


business services (Table A.2). The ratio of international servicesdeficit to GDP was 0.3 percent.

The transport services held the major share in the volume ofservices. Transport services balance has improved, the deficitdecreasing by 16.5 percent. The volume of goods transportservices was 67.1 percent of the total transport services, whilethe passenger transport services - 22.8 percent, the auxiliarytransport services holding the remaining share.

Travel services recorded inflows in the value of USD 212.52million and outflows amounting to USD 331.48 million. Thepersonal trips held a significant share of 59.4 percent in thevolume of trade in travel services.

Communication services recorded a surplus of USD 99.88 mil-lion. Services rendered to non-residents were valued at USD140.04 million, while those received - at USD 40.16 million.

Income recorded a surplus of USD 829.29 million, increasing by46.5 percent, mainly due to the 11.9 percent growth of revenuesfrom work performed by non-resident employers (Table A.3).Total inflow of revenues were valued at USD 1044.27 million(+12.6 percent) and outflow - at USD 214.98 million (-40.5percent).

Net investment income were valued at USD 149.16 million,decreasing by 49.8 percent compared with 2011, of whichdividends payments were USD 129.21 million (by 16.8 per-cent less). Several foreign-owned enterprises paid dividends toshareholders that exceeded the profits gained in the reportingperiod, which led to lower reinvested income.

The scheduled interest-related payments were as follows: onNBM loans – USD 2.35 million, on government loans - USD14.54 million, on commercial banks loans - USD 21.75 million,and on loans of enterprises from other sectors - USD 21.23million (including intra-group loans service - USD 4.89 million).

Unilateral current transfers recorded a surplus of USD 1605.10million, representing 22.1 percent of GDP, inflows increased by5.8 percent and output - by 5.1 percent (Table A.4).

The surplus in current transfers was determined by personaltransfers, inputs were valued at USD 769.29 million, up by 9.7percent compared with 2011. Technical assistance offered tothe Republic of Moldova by international organizations andforeign governments as grants and consultancy was valued atUSD 297.23 million. Humanitarian aid received was estimatedat USD 29.94 million. The amount of membership fees in


international organizations paid by the Republic of Moldovaand its residents was USD 6.85 million.

The capital and financial account of the balance of paymentsregistered a surplus amounting to USD 427.01 million. Netfinancial inflows have decreased compared to 2011 primarilyas a result of the increase in official reserve assets and reducingnet inflows in direct investment (Chart 2.35).

The capital account recorded a deficit of USD 34.78 million,

Chart 2.35: Capital and financial account,main components (million, USD)

-600-400-200

0200400600800

100012001400

2008 2009 2010 2011 2012Capital account Direct investmentPortfolio investment* Other investmentReserve assets Capital and financial account

Source: NBM* including financial derivates

driven by capital outflows of people who immigrate to perma-nent residence abroad.

The financial account resulted in financial net inflows amount-ing to USD 461.79 million (Table A.5).

Foreign direct investment (FDI) recorded the net value of USD159.21 million (Table A.5).

Inflows of foreign direct investment in the national economyconstituted USD 336.59 million, decreasing by 21.8 percentcompared to 2011 (Table A.6). Although share capital inflowsincreased, the decrease was driven by lower reinvested incomefrom the fact that many enterprises with foreign capital paid toshareholders dividends that exceeded the profits in the currentperiod. It should be mentioned that the procurement of realestate by non-resident individuals and legal entities held a shareof 27.7 percent in the FDI inflows.

Foreign direct investment outflows were valued at USD 177.38million. Both the share capital withdrawals (partially convertedinto portfolio investment) and the repayments of previous loansfrom affiliated creditors abroad have increased.

Foreign direct investment stock accumulated at the end of2012, constituted USD 3338.79 million (Chart 2.36), of which:

Chart 2.36: Foreign direct investment in thenational economy* (milion, USD)

711.05 695.34704.08

740.65769.97

1885.23 2001.67 2175.56 2429.37 2568.82

0

500

1000

1500

2000

2500

3000

3500

2008 2009 2010 2011 2012

0

100

200

300

400

500

600

700

800

Intra-group loans, stock at the end of period

Equity contribution and reinvested income,stock at the end of period

Net flows (right scale)

Source: NBM*stock calculated according to the historical cost

equity contributions and reinvested income – USD 2568.82 mil-lion, intra-group loans (other capital) - USD 769.97 million.

The major share in the FDI stock accumulated in equity capital(52.7 percent) was held by investors from EU countries. Theinvestors from CIS countries held a share of 11.6 percent of thestock of FDI in equity capital and investors from other countries- 35.7 percent.

The evolution of FDI stock in the equity capital of the bankingsector was marked by increased investment from Germany anddecreased stock investment from Austria. The increase of FDIstock in the share capital of other sectors has been driven by newentries from the Netherlands, Italy, USA and other countries.


Direct investment abroad declared by the residents of theRepublic of Moldova during 2012 totaled USD 19.78 million innet value (Table A.6).

Portfolio investment recorded net inflows of USD 16.51 million,driven by purchases of shares in the banking sector by non-residents.

Financial derivatives recorded net outflows of USD 0.24 mil-lion, due to foreign exchange swaps performed by licensedbanks.

Other investment resulted in net financial inflows in the amountof USD 803.72 million, which increased by 7.7 percent com-pared to 2011.

Foreign claims (assets) decreased by USD 156.36 million during2012 (Chart 2.37), determined by net payments of commercialloans previously granted to non-residents by domestic exportingagencies (USD 82.76 million) and by the net decrease of assetsin the form of foreign currency and deposits (USD 78.56 million).

Chart 2.37: Other investments – financialassets, net flows (milion, USD)

-270-225-180-135-90-45

04590

135180

2008 2009 2010 2011 2012

LoansCommercial loans and other assetsCurrency and depositsTotal assets

Source: BNMNote: (-)increase

Chart 2.38: Other investments – financialliabilities, net flows (million, USD)

-100

0

100

200

300

400

500

600

700

2008 2009 2010 2011 2012Other liabilitiesArrears change for energy resourcesCurrency and depositsLoansCommercial loansTotal liabilities

Source: NBM

Commitments to non-residents (liabilities) increased in net valueby USD 647.36 million during 2012 (Chart 2.38), determinedby the net withdrawals from loans in the amount of USD 426.39million, and the commercial loans granted by foreign partnersto local economic agents (USD 138.88 million). Deposits ofnon-residents held with local licensed banks decreased in netvalue by USD 5.45 million.

Financial flows of foreign loans, broken down by sector, aredetailed in the Table A.7.

The loans on total sectors were USD 1027.97 million (by 33.3percent more than in 2011), of which on long-term - USD 814.10million, on short-term - USD 213.87 million.

The foreign loans of the public sector (NBM and the Government,without public corporations) in 2012 totaled USD 299.28 mil-lion, up by 28.9 percent from 2011, the repayments remainingat the same level.

In 2012, the National Bank of Moldova has used USD 154.64million (equivalent of SDR 100.00 million) under the ExtendedCredit Facility (ECF) and the Extended Financing Facility (EFF),granted by the International Monetary Fund and reimbursedUSD 16.13 million of previously contracted loans.

The Government of the Republic of Moldova used loans in theamount of USD 144.64 million, of which USD 75.92 million


from the International Development Association, USD 36.19million from the European Investment Bank, USD 10.57 millionfrom the IBRD and other creditors, the reimbursement beingmade on term - USD 49.41 million.

The foreign loans of the private sector increased by 35.2 percentcompared to 2011.

The licensed banks borrowed from abroad USD 305.91 million,by 37.0 percent more than in 2011, which was determined bythe contracted short-term loans, while USD 278.58 million werereimbursed.

The economic agents from other sectors have used during 2012foreign loans in the amount of USD 422.78 million (not includ-ing the loans from affiliated companies from abroad, which areincluded in direct investment), which represents an increase of34.0 percent. Scheduled repayments constituted USD 257.46

Chart 2.39: External loans, at the end ofperiod, by sectors (million, USD)

4079.464358.91

4786.345442.61

6132.01

0

880

1760

2640

3520

4400

5280

6160

2008 2009 2010 2011 2012Government and NBMBanksOther sectorsCommitments to foreign investorsTotal

Source: NBM

Chart 2.40: Evolution of external debt toGDP (%)

67.4

80.2 82.377.6

15.821.0 23.2 21.7 24.3

84.5

51.559.2 59.1 55.9 60.2

0102030405060708090

100

2008 2009 2010 2011 2012

Gross external debt, total / GDPPublic and publicly guaranteed external debt / GDPPrivate non-guaranteed external debt / GDP

Source: NBM

million, while actually were reimbursed USD 251.41 million,the remains increasing the arrears.

Other liabilities (arrears and other outstanding commitments)increased in net value by USD 87.54 million during 2012, whichwas due to increased arrears of outstanding energy-relatedimports.

Official Reserve Assets reached at the end of 2012 the level ofUSD 2515.00 million, increasing by 28.0 percent compared to2011.

The increase in state reserves assets from actual transactionswas USD 497.63 million, due to exchange rate fluctuation ofother currencies against the U.S. dollar - USD 40.37 million,while following the revaluation of financial instruments - USD8.30 million.

To the reserve assets increase has also contributed the goldreceived from the State fund of precious metals and stones toincrease the authorized capital of the NBM in the amount ofUSD 3.38 million.

2.5 External debt of the Republic of Moldova

The gross external debt of the Republic of Moldova increased dur-ing 2012 by USD 689.4 million (+12.7 percent) and constitutedUSD 6132.01 million on December 31, 2012 (Table A.8, Chart2.39).


External debt, broken down by institutional sectors, was asfollows: the government sector - 20.3 percent, monetary author-ities - 7.6 percent, banking sector - 9.3 percent, other sectors- 46.8 percent, commitments to foreign direct investors - 16.0percent.

On December 31, 2012 the long-term external liabilities totaledUSD 3856.82 million (+13.4 percent) and were made up ofloans from direct foreign investors – 20.5 percent, other long-term liabilities – 74.8 percent and SDR allocations – 4.7 percent.

Chart 2.41: The ratio of public and pub-licly guaranteed external debt to exports ofgoods and services (%)

38.557.0 55.7

58.948.2

0

50

100

150

200

2008 2009 2010 2011 2012

External public and publicly guaranteed debt /Export of goods and servicesIndicative ceiling

Source: NBM

Chart 2.42: The ratio of public and publiclyguaranteed external debt to governmentrevenues (%)

39.053.9 60.6 59.2 62.2

0

50

100

150

200

250

300

2008 2009 2010 2011 2012

External public and publicly guaranteed debt /General government revenuesIndicative ceiling

Source: NBM

Chart 2.43: The ratio of public external debtservice* to exports of goods and services(%)

3.7 4.53.4 3.0 3.2

0

5

10

15

20

25

2008 2009 2010 2011 2012

Public external debt service (according to the schedule)/ Export of goods and servicesIndicative ceiling

Source: NBM* including private loans guaranteed and undertaken by thestate

The short-term external debt totaled USD 2275.19 million (+11.4percent) and included: commercial loans (consisting mostly ofadvances and bills unpaid on time) - 50.8 percent, historicaldebt for energy imports - 22.2 percent, arrears (outstandingcommitments at maturity for foreign loans on long term andshort term) - 15.6 percent, bank deposits (on term and ondemand) of non-residents in the licensed banks of the Republicof Moldova - 6.4 percent, short-term loans - 4.7 percent, andother liabilities - 0.3 percent.

At the end of 2012, public and publicly guaranteed external debtconstituted USD 1762.56 million (+15.9 percent), and privatenon-guaranteed external debt - USD 4369.45 million (+11.4percent) (Table A.9).

Loans and allocations of SDRs constituted USD 4318.78 million,of which 40.8 percent are public sector liabilities (includingthe NBM debt, direct state debt and private debt undertakenby the state following the execution of guarantees and publiccorporations debt), and 59.2 percent are loans contracted byeconomic agents from private sector, including the intra-grouplending.

During 2012, the Republic of Moldova has received furthersupport from the international organizations, the NBM usingUSD 154.64 million and the Government - USD 144.64 million.

The external public debt to multilateral creditors amounted toUSD 1039.32 million on December 31, 2012, the major sharein the balance of external debt being held by: the IBRD and IDA- 54.2 percent, the IMF - 31.5 percent, the EIB - 6.0 percent, theIFAD - 5.2 percent.

The liabilities to bilateral creditors were USD 200.60 million, ofwhich 42.2 percent of the Russian Federation Government.

External debt sustainability indicators

During 2012, following the new public and private sector com-mitments, the ratio of gross external debt to GDP increased


by 6.9 percentage points, totaling 84.5 percent (Chart 2.40).Public and publicly guaranteed external debt of the Republic ofMoldova has remained moderate and did not exceed the ceilingof 50.0 percent of GDP7.

Chart 2.44: Public external debt service*pressure on public finances (%)

3.7 4.2 3.5 3.7 3.5

0

5

10

15

20

25

30

35

2008 2009 2010 2011 2012

Public external debt service (according to the schedule)/ General government revenuesIndicative ceiling

Source: NBM*including private loans guaranteed and undertaken by the state

Chart 2.45: Coverage ratio of short-termexternal debt by official reserve assets (%)

119.6

97.8100.6

96.3

110.6

90

95

100

105

110

115

120

125

2008 2009 2010 2011 2012

State official reserve assets/Short-term external debt

100%

Source: NBM

The public and publicly guaranteed external debt (as a ratio toexports of goods and services made in 2012) represented 55.7percent, by 7.5 percentage points more compared to 2011 amidstagnant exports (Chart 2.41).

The public and publicly guaranteed external debt (as a ratio tothe general government revenue) increased from 59.2 percentin 2011 to 62.2 percent in 2012, the revenue increasing moreslowly than the debt (Chart 2.42).

Public debt service was in the last six years below the level of5.0 percent of the volume of exported goods and services (Chart2.43).

The pressure of public external debt service on public financeswas also low - 3.5 percent of general government revenues(Chart 2.44).

The coverage ratio of short-term external debt by the stateofficial reserve assets amounted to 110.6 percent (Chart 2.45).

7Indicative ceilings under CPIA score (Country Policy and InstitutionalAssessment) developed by the World Bank. In 2011, the IDA resourceallocation index of the Republic of Moldova increased to 3.78, so the ceilingswere set at: 50.0 percent for the ratio of debt to GDP to 200.0 percent ratiofor the ratio of debt to exports, 300.0 percent for the ratio of debt to generalgovernment revenues, 25.0 percent for the debt service to exports and 35.0percent for the ratio of debt service to general government revenues.

37

Chapter 3

The activitity of the NationalBank of Moldova in 2012

3.1 Achievements of the monetary and for-eign exchange policy in 2012

According to the Law no.548-XIII of July 21, 1995 on the NationalBank of Moldova, the NBM is the central bank of the Republicof Moldova, an autonomous public legal entity that establishesand promotes the monetary and foreign exchange policy.

The fundamental objective of the National Bank of Moldova isto ensure and maintain price stability. Without prejudice to itsfundamental objective, the National Bank of Moldova promotesand maintains a financial system based on market principlesand supports the economic policy of the state.

In order to achieve this objective, the National Bank of Moldovapromotes its monetary policy according to the strategic direc-tions of the activity set in the monetary policy strategy.

Regulatory framework of the monetary policy in 2012

During 2012, the NBM acted in accordance with the MonetaryPolicy Strategy for 2010-2012, approved by the Council ofAdministration of the National Bank of Moldova on December29, 2009 and amended on December 30, 2010.

According to this strategy, in order to ensure and maintain pricestability, the NBM has set its inflation target for 2012, measuredby the consumer price index published monthly by the NationalBureau of Statistics (NBS), at the level of 5.0 percent with apossible deviation of ± 1.5 percentage points.

In this context, quantifying the macroeconomic situation, thetrends and projections of macroeconomic indicators in the


medium term, the inflation outlook in the short and mediumterm, amid possible uncertainties and challenges during thereference period, as well as to anchor inflationary pressures,the National Bank of Moldova has promoted during 2012 anadaptive monetary policy under low inflation. As a result, theannual inflation rate of 4.1 percent recorded in December 2012was lower than the 7.8 percent recorded in December 2011 andwas within the range of the objective stated for the end of 2012.

The Council of Administration of the National Bank of Moldovaapproved within its meeting of December 27, 2012 the newMonetary Policy Strategy of the NBM on medium-term. Thisdocument is a continuation of the Monetary Policy Strategyfor 2010-2012 and includes the medium-term strategic direc-tions of activity of the monetary authority aimed at achievingthe fundamental objective of ensuring and maintaining pricestability.

This strategy provides for the implementation of the directinflation targeting regime. At the same time, the NBM willimplement a managed floating regime of the exchange ratewithout having a predetermined target exchange rate of theMDL. In order to assess the monetary policy’s effectiveness, theNBM will publish quarterly an Inflation Report as in accordancewith the strategy, which will include an analysis of the macroe-conomic situation, a medium-term (2 years) forecast of inflationand main macroeconomic indicators, as well as the risk analysisto achieve the future quantitative target.

At the same time, in order to enhance the communication andpublic relations, the strategy envisages a number of measures:development and publication of NBM official reports, researchesand study journals, organization of conferences, seminars andround tables with experts, researchers and the academia.

Macroeconomic research, analysis and forecastingactivity

In 2012, the National Bank of Moldova continued to strengthenthe analysis and forecasting framework necessary to supportthe monetary policy decisions. The initiated research projectswere focused on priority issues for achieving the fundamentalobjective of the NBM. The analysis, forecasting and macroeco-nomic research activity has been concentrated in the MonetaryPolicy and Research Department as in previous years.

In 2012, several research papers have been started; one of themcomprised a study on the floating holidays’ seasonal effects. It is

Chapter 3. The activitity of the National Bank of Moldova in 2012 39

essential to take into account the differentiation of the Republicof Moldova’s holiday calendar from that of other countries inthe process of seasonal adjustment in economic time series,optimizing this way the quality of statistical indicators andensuring the accuracy of macroeconomic analysis. The researchpaper designated for developing a simplified method of incor-porating the seasonal effect, created by the holidays that arespecific for the Republic of Moldova, into a model of seasonaladjustment of statistical indicators should be also mentioned.Based on this model, it was attempted to find out whetherthere is an impact of the national holidays and Easter effect onsome quarterly macroeconomic indicators - GDP, household finalconsumption, government final consumption, unemployment- and on some monthly macroeconomic indicators - consumerprice index, consumer price index of food, the price index ofindustrial production and money in circulation. According to theresults was analyzed the indicator showing the highest degree ofsensitivity to seasonal deviations caused by the holiday calendar(final consumption of government).

The predictive ability of money on inflation was another subjectof investigation. In this regard, in addition to exploring theinformation related to the dynamics of money supply (M2),there have been developed several other indicators: the mon-etary overhang, the nominal money gap and the real moneygap. Inflation has been modeled by several methods by theuse of all the above-mentioned indicators, either separatelyor in combination. Two out of the eight developed modelshave served as reference and were based on random walk andautoregressive models. These two have served as referencemodels. Thus, the results of other models were compared withrespect to the reference ones. The main resulting conclusion isthat the money dynamics helps to improve the inflation forecastaccuracy. Money growth, among other indicators developedin this investigation, proved to be the most informative aboutthe future inflation in the medium term. This effort is part of alonger term activity in the development of monetary analysis.

Estimation of second-round effects on core inflation was anothertopic for study in the reference period. The way the core infla-tion reacts to the changes in fuel and food prices on internationalmarkets represents a significant interest for the monetary policy.A major concern for the monetary policy is determined by thedomestic market and namely by the form of reaction of coreinflation to the changes in fuel and food prices, the impact ofthese changes on core inflation is expected to be significant.Therefore, determining the transmission mechanism and theinternal and external factors impact on the core inflation is oneof the main objectives of many of the macroeconomic studiesof monetary policy. In order to determine and estimate the


second-round effects on core inflation a structural VAR (vectorautoregression) model was used.

During 2012 were conducted researches on the estimationof potential GDP growth. It is defined as real GDP that canbe produced by the economy without generating inflationarypressures, being also called non-inflationary GDP. The growthrate of GDP in the medium term may vary for several reasons,thus temporarily deviating from its equilibrium value or levelin the long term. Therefore, the estimation of the equilibriumlevel of GDP is not associated with some specific level of in-flation, but it is related only to the absence of some pressuresthat would change the inflation level. Potential GDP is not anobservable or measurable variable and for the calculation ofthe aforementioned indicator were applied different techniques.This paper presents the results of applying several methods fordetermining the growth rate of potential GDP in the Republic ofMoldova. The unobservable nature of the variable in questionand the statistical deficiencies of objective nature induce anuncertainty of the obtained results. However, the estimatesmade by different methods with different specifications providesimilar conclusions regarding the dynamics and values of po-tential GDP growth. The box no.4 of the Inflation Report no.3,2012 describes some concepts of potential GDP.

The process of developing the analysis and forecasting frame-work associated with the monetary policy formulation processhas been continued. The identification of alternative assump-tion sources about the future evolution of the external sectorwas one of the priorities proposed. The opportunity of usingsurvey-based forecasts, carried out by companies such as Reutersand Bloomberg, was tested. These actions were aimed at theelimination of shortcomings in the foundation of forecasts, likethe delayed and, to some extent, incoherent publication ofassumptions about the external sector.

The development of minimum prudential procedures for databasemanagement has been a beneficial contribution to strengtheningthe monetary policy analysis and forecasting system. However,there will be further made efforts towards developing a compre-hensive database system and, at the same time, very interactive,in order to provide maximum utility for analysis, forecastingand macroeconomic researches.

The maintenance of existing and used models in the monetarypolicy processes has been a concern throughout 2012. In thisregard, special attention was given to full quarterly forecastingrounds in the prior periods. The econometric models were re-estimated while increasing the sample time series, but also asa result of recording unsatisfactory deviations of actual values


from those predicted by the equations. Techniques for forecast-ing inflation in the medium term were improved by elasticityrecalibration. Thus, tests were used, such as impulse responsefunctions, in-sample forecasting, historical decomposition ofbehavioral equations etc.

In order to estimate the inflation expectations was attemptedto develop a yield curve analysis. Given the insufficient or nofinancial instruments with at least a medium term maturity, theaforementioned analysis turned to be relatively rudimentary.There have been taken into account only state securities yields,whose market is relatively liquid. However, even for these assets,the analysis of the maturities of more than one year is subject toincreased uncertainty due to their small volume in comparisonwith the ones with earlier maturities.

The analysis of the opportunity to use a specific reference priceof oil was carried out in order to represent as accurate as possi-ble the external inflationary pressures arising from energy pricedevelopments. Some aspects of the analysis were addressedin the box no.1 “Oil brand: price differences and factors ofinfluence” of the Inflation Report no.3, 2012.

In order to optimize the process of short-term forecast of eco-nomic activity was attempted to develop certain Bayesian-typemodels. Being a market economy with a relatively small historyand that has been subject to many structural changes, the shortperiod of macroeconomic indicators, which in some cases donot allow an efficient estimation of a high number of correlationcoefficients of the economic variables of interest, representsa problem for the analysis and forecasting. However, thisconstraint was reduced by applying Bayesian techniques, whichallow the incorporation of additional information into existingmodels. In this way, it was able to obtain in 2012 some BayesianVector Autoregression (BVAR) models for GDP and domesticconsumption, similar models for other components of GDP,such as gross capital formation, exports and imports are to bedeveloped in the future. In the process of short-term inflationforecasting, the techniques and models developed and the con-tinuous monitoring of inflationary pressures that have occurredboth in the external environment and the internal one allowedthe development of accurate CPI projections with minimumdeviations from the actual data due to objective factors thatcould not be anticipated, as shown in the four inflation reportspublished during 2012.

It should also be mentioned that during the reporting year, theNBM staff participated in a series of scientific events such asseminars, conferences and symposiums. Publication of articles,studies and other research journals was another scientific mani-festation of the experts involved in the analysis and forecastingprocesses of the monetary policy.


Communication and transparency of monetarypolicy

Central bank communication in terms of transmission of in-formation related to the analysis, actions and decision-makingprocesses to the markets, media and public, contributes to theeffectiveness and credibility of the monetary policy. Thus, aneffective communication facilitates the understanding of thetarget groups of the responses of the monetary policy promotedby the NBM at the shocks and economic developments, thusinfluencing market expectations and improving the transmissionto the real economy of changes in monetary policy.

The communication activity of the National Bank of Moldovaduring 2012 was focused on fulfilling its mandate and activitiesto ensure and maintain price stability, aiming to provide agreater understanding by the general public of the monetarypolicy decisions in the context of a continued moderation of do-mestic economic activity, the impact of the Euro zone sovereigndebt crisis and the ongoing uncertainties associated with globaleconomic development.

Increased frequency and intensity of the messages with theirsuitability to different target groups, such as business envi-ronment, media, academia, and the general public were thedefining attributes of communication for the purposes of itsamplification.

In order to ensure the transparency and timely informationto the public about the monetary policy decisions, the NBMpublished monthly press releases, on the day of the meetings ofthe Council of Administration of the NBM on monetary policy,which were related to the base rate and required reserves, aswell as to the factors and premises that were the basis for therespective decisions.

Communication has been strengthened by publishing press re-leases on inflation within two days after the NBS announced theinflation rate. Since May 2012, the NBM has published at theend of each month press releases on loans and deposits marketdevelopment and on monetary indicators development.

At the same time, during 2012 the NBM announced quarterlymacroeconomic results through reports on inflation, which re-flected also the inflation forecasts and the risks and uncertaintiesthat may affect the estimated inflation.


In order to ensure a greater understanding of the value ofprojected inflation, the NBM has organized on the day of pub-lication of the reports on inflation press conferences with theparticipation of the NBM governor and the media, where theexternal economic situation and the domestic economy devel-opment, which substantiated the forecast medium term, wereexplained.

Seeking to ensure the transparency of the monetary policy, theNBM has expanded its target groups and communication chan-nels in terms of the role of the monetary authority in financialeducation of academic community. Thus, on November 13,2012, the NBM organized a roundtable hosted by the StateUniversity of Moldova on “Inflation forecasting in the NationalBank of Moldova”. The event was attended by representativesof the Department of Monetary Policy and Research of theNBM, students and teachers in Economics of the aforementioneduniversity. The discussions were focused on inflation dynam-ics, the transmission mechanism of monetary policy decisionsthrough the interest rate channel, the evolution of aggregatedemand and supply and the quantitative value of the forecast.There have been also identified and explained the current de-velopments and prospects of the external environment and thenational economy considered to substantiate the forecast.

In 2012, the official website of the NBM has been developedby extending the background information as to improve itspresentation form, which remains to be an important channelfor the dissemination of information and messages in real-time.Thus, a new section was created, which provided answers tothe most common questions and requests received by the NBMfrom the general public. At the end of 2012, the NBM createdon its official website a new rubric - Inflation rate - to identifythe inflation target, the updated annual inflation rate and itsforecast.

To implement the provisions of the Law no.239-XVI of November13, 2008 on the transparency in the decision-making processand the Regulation on the transparency in the development anddecision-making process of the National Bank of Moldova, theNBM continued in 2012 to ensure the participation of centraland local public authorities, financial institutions and citizens inthe decision-making process through the category on the officialwebsite of the NBM - Public consultations.

The National Bank of Moldova continued in 2012 the activityof responding to the requests and complaints received from thegeneral public. The main topics of public interest focused onaspects of base rate development in specified periods and thesimilarity of base rate and refinancing rate phrases.


In 2012, the NBM has sent via mail about 200 copies of elec-tronic publications (CD) to a number of beneficiaries includedin the sending lists.

Since June 2012, the NBM joined the International StandardBook Number, assigning an ISBN code to all its publication,which included the bank reports in the international informationflow.

At the end of 2012, the NBM approved and made public itsMedium-term Monetary Policy Strategy, which is a continuationof the Monetary Policy Strategy of the National Bank of Moldovafor 2010-2012 and includes strategic directions of activity ofthe monetary authority in the medium term, targeted to achievethe fundamental objective of ensuring and maintaining pricestability.

During the subsequent period, the NBM will pursue the devel-opment of an efficient communication system in the context ofimproving the communication tools and channels, capable ofensuring a predictable full and clear communication, to anchorthe inflation expectations to the inflation target announced inthe Medium-term Monetary Policy Strategy.

Implementation and promotion of the monetary andforeign exchange policy in 2012

Chart 3.1: Monthly evolution of interestrates corridor (%)

0

2

4

6

8

10

12

14

1/11

2/11

3/11

4/11

5/11

6/11

7/11

8/11

9/11

10/1

111

/11

12/1

11/

122/

123/

124/

125/

126/

127/

128/

129/

1210

/12

11/1

212

/12

Overnight credits Overnight deposits

Interbank credits/deposits 91-day T-bills

Source: NBM

In order to achieve its fundamental objective, the NBM usedopen market instruments - the main instrument of monetary pol-icy, as well as auxiliary instruments - standing facilities, requiredreserves ratio and foreign exchange market intervention.

Money market conditions were routed through the establish-ment by the NBM of the main short-term interbank marketinstrument - the base rate.

The consecutive decrease in the base rate during November-December 2011 and January-February 2012, due to macroeco-nomic turbulence in the Member States of the European Union,the decrease in the international food prices and the slowdownin domestic demand were aimed at mitigating the deflationaryrisk in the Republic of Moldova during 2012.

The NBM has halted to further decrease the base rate in March2012, when it was certain about the medium-term forecast ofinflation, according to which the inflation would fall within therange.


The gradual reduction of the NBM monetary policy rate hasresulted in a general downward trend of the interest rate onstate securities (SS) with a maturity of 91 days. Its adjustment,halted in mid-June for an episodic growth that has been fullycorrected in the following months, has slowed towards the endof the year.

Chart 3.2: Evolution of the reference rateon interbank market and the NBM base rate(%)

2

4

6

8

10

12

7/01

/11*

5/08

/11*

6/09

/11*

2/12

/11*

6/01

/12*

3/02

/12*

2/03

/12*

CHIBID (2W) CHIBOR (2W) NBM base rate

Source: NBM*date of changing of base rate

The NBM monetary policy impulses were less experienced bythe interbank market, the latter being characterized by a verylimited number of transactions, which was due to the consistentlevel of liquidity recorded in the market. The average interestrate on interbank loans / deposits fluctuated during 2012 fromone month to another between 3.24 - 10.00 percent annually,falling usually within the NBM interest rate corridor.

Unlike 2011, when the reference interest rate on the interbankmarket CHIBOR2W followed the NBM base rate developments,the registered decrease was less extensive than the base ratein 2012, which has significantly distanced, being close to theupper limit of the interest rate corridor (Chart 3.2).

Monetary policy instruments

The adequacy of real broad monetary conditions, in terms ofmonetary policy objective, was achieved through the interestrate policy, supported by appropriate management of liquidityby the central bank, where the main role continued to be held bythe open market operations, standing facilities and the requiredreserves mechanism.

The set of monetary policy instruments used by the NBM, ap-propriate to the operational framework in place, has proved tobe further adequate to the requirements for the monetary policyimplementation, in the specific context of 2012.

Open market operations

The National Bank of Moldova conducted open market oper-ations according to its schedule for 2012, published on theNBM official website, announcing sterilization operations ofliquidity surplus in the banking sector by selling NBM certificates(NBC). At the same time, given both the slow dynamics of thedomestic demand and the inflection in global economic activitydynamics, which continued to affect the growth rate of thenational economy, the NBM has resumed as of March 14, 2012,liquidity injection operations through State securities Repo-buying operations. These operations were to provide additionalsupport to banks in managing liquidity and contribute thus to


the revitalization of lending to the economy by the licensedbanks.

NBM Certificates selling

Since the net liquidity position of banks recorded only positivevalues in this period, the central bank acted generally as thedebtor of the banking system.

During the year, there have been conducted 104 auctions forselling NBM Certificates, with the announcement of the max-imum interest rate equivalent to the base rate, the NBM fullyaccepting all of the participants’ offers.

Due to the fact that interest rates required in the applicationswere equal to the maximum rate announced at auctions, theNBC were sold at an interest rate equivalent to the NBM baserate.

The average balance of sterilization operations recorded a higherlevel than in 2011 (MDL +517.1 million), representing MDL3750.0 million, an increase partially driven by the NBM inter-vention on the domestic foreign exchange market in the form ofpurchases of foreign currency.

In 2012, the weighted average rate of sterilization operations

Chart 3.3: Balance of sterilization opera-tions (million, MDL) conducted by the NBMin 2012

3773.4

3737.5

3134.2

3794.73818.3

4074.14025.1

3461.6

4195.7

3598.53796.7

4014.6

2700

3200

3700

4200

4700

1/12

2/12

3/12

4/12

5/12

6/12

7/12

8/12

9/12

10/1

2

11/1

2

12/1

2

Source: NBM

amounted to 5.05 percent annually, compared to 8.54 percentrecorded in 2011, an effect obtained as a result of lower baserate. This has influenced the cost incurred by the NBM tosterilize the excess liquidity as to lower it from MDL 274.9million in 2011 to MDL 193.2 million in 2012.

State securities Repo-buying operations

According to the schedule posted on the official website, theNBM has announced since March 14, 2012, weekly state securi-ties REPO-buying operations for 28 days at a fixed rate of 4.75percent (base rate plus a margin of 0.25 percentage points).These operations were conducted through auctions, the amountof liquidity provided in the months from March to April wasMDL 22.5 million, banks’ demand being fully met.

Lending activity

Under the influence of increased liquidity excess, the liquidityinjection activity of the NBM in 2012 could be characterized asa secondary one, the liquidity sterilization operations from themarket, like in 2011, continued to play the main role.

The creditor debt of the licensed banks to the NBM amountedto MDL 290.1 million as on December 31, 2012, which was


made up of loans granted to banks to protect the integrity ofthe banking system (MDL 279.4 million) and loans granted forlending to Cooperative Societies for Housing Construction (MDL10.7 million).

Compared to the end of 2011, banks’ creditor debt to the Na-tional Bank of Moldova has decreased by MDL 103.9 million,or by 26.4 percent. The decrease occurred as a result of thefull payment of loans granted to banks to maintain the liquidity,the payment of due tranches of the loan granted to protectthe integrity of the banking sector and the tranches of theloans granted for lending to Cooperative Societies for HousingConstruction (CSHC).

During 2012, the National Bank of Moldova continued to mon-itor the loan granted to “Banca de Economii” S.A. in 2009to protect the integrity of the banking system. According tothe terms of the contract that are based on the Law no.190 ofSeptember 30, 2011 on additional measures to ensure financialstability, the aforementioned loan was repaid during 2012 by“Banca de Economii” S.A. within the terms set appropriatelyto the calendar for government bonds redemption, which areissued by the Ministry of Finance and submitted to the bank asto take over the claims of C.B. “Investprivatbank” S.A. in theliquidation process. Thus, the amount of the loan paid to theNBM in 2012 amounted to MDL 93.2 million and the balanceat the end of the year amounted to MDL 279.4 million.

Fulfilling its function of lender of last resort, in the first twomonths of 2012, the National Bank of Moldova has grantedcredit resources to a bank in the amount of MDL 14.0 million inorder to maintain the liquidity, based on the terms of the creditcontract signed with the bank in November 2011.

The aforementioned loan was granted by ensuring it fully withcollateral, at the base rate of the National Bank of Moldova,variable during the credit contract period, plus a margin of 3.0percentage points. Taking into account the evolution of the baserate in January-February 2012, the rate on this loan during thatperiod decreased from 12.5 to 9.5 percent annually. Upon thematurity, the loan has been fully paid from the debtor’s account.

As a result of the payment of the tranches at maturity and theadvance payments, the loans granted to banks during 1992-2002 for lending to CSHC decreased by MDL 3.2 million in2012, the balance of loans at the end of the year totaled MDL10.7 million, by 23.0 percent less compared to the balancerecorded at the end of 2011.


Standing facilities

The standing facilities regime (overnight deposits and credits)in 2012 allowed banks to manage their liquidity efficiently andprovided National Bank of Moldova with more flexibility toconduct the monetary policy.

Interest rates on standing facilities of the National Bank ofMoldova in 2012 were established in a symmetrical corridor,the deviations from the monetary policy rate constituting 3.0percentage points.

In 2012, along with the base rate, the interest rates on standingfacilities of the NBM were consequently reduced: by 1.0 per-centage points from January 6th and by 2.0 percentage pointsfrom February 3rd and March 2nd respectively, after which theywere maintained until the end of the year at the level of 7.5percent annually for overnight loans and 1.5 percent annuallyfor overnight deposits.

Overnight credit facility

In the context of a high liquidity excess in the banking systemduring 2012, the banks have not resorted to overnight creditfacility.

Overnight deposit facility

On the background of increasing safety of the control overliquidity by increasing sterilization operations, the banks haveresorted less to the deposit facility in 2012 as compared to theprevious year.

The volume of overnight deposits with the NBM totaled MDL59901.0 million in 2012, which indicates an average daily bal-ance of MDL 229.7 million, decreasing by 6.0 percent comparedwith 2011.

On December 31, 2012 the balance of overnight deposits placedby banks with the NBM was MDL 613.0 million.

During 2012, the banks placed overnight deposits with theNational Bank of Moldova. Resorting to the deposit facility withpreference at the end of required reserves maintenance periods,banks have demonstrated a good capacity for managing theirliquidity.


Required reserves

In 2012, the required reserves mechanism continued to exercisethe monetary control function, which is closely correlated withthat of liquidity management by the NBM.

During 2012, the features of the required reserves regime re-main unchanged, the amendments to the Regulation on requiredreserves regime, made by the Decision of the Council of Admin-istration of the NBM no. 212 of September 20, 2012 (OfficialMonitor of the Republic of Moldova no.205-207 of September28, 2012 Art.1146), were related to the complementation of the

Chart 3.4: Evolution of attracted funds inMDL, of required reserves in MDL and ofthe required reserves ratio in 2012

0

5000

10000

15000

20000

25000

1/12

2/12

3/12

4/12

5/12

6/12

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10/1

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11/1

2

12/1

2

0

5

10

15%

Required reserves in MDL (monthly average)Attracted funds (monthly average)Required reserve ratio (right scale)

MDL, million

Source: NBM

calculation base for the required reserves as a result of changesin the Chart of accounts of the bookkeeping within licensedbanks of the Republic of Moldova.

Maintaining the required reserves ratio at the level of 14.0percent of the base was explained by the passivity of the in-terbank money market, aiming at improving its quantitativeand qualitative indicators and at improving the transmissionmechanism.

In 2012, the required reserves in national currency were placedon an ascending curve due to the increase of attracted funds.The average amount of required reserves in MDL maintained bybanks during December 8, 2012 - January 7, 2013 amountedto MDL 2917.8 million, up by MDL 530.7 million or by 22.2percent compared with the same period of 2011.

Chart 3.5: Evolution of required reserves inUSD and EUR during 2012

60

70

80

90

100

1/12

2/12

3/12

4/12

5/12

6/12

7/12

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2

12/1

2

conv

entio

nal u

nits

, mill

ion

Required reserves in USD Required reserves in EUR

Source: NBM

Required reserves in foreign currency, both in USD and EUR,had a positive trend during 2012. As of December 31, 2012, theamount of required reserves in foreign currency, formed andmaintained by banks at the National Bank of Moldova amountedto USD 67.9 million and EUR 91.6 million, increasing by 12.2and 1.9 percent respectively compared to December 31, 2011.

Based on Art.17 of the Law no.578-XIII of July 21, 1995 on theNational Bank of Moldova, in order to reduce the cost of bankassets, the NBM pays to banks an interest for the reserves thatexceed 5.0 percent of the attracted funds, which amounted toMDL 37.9 million in 2012. Compared with 2011, due to the re-duction in the interest rate of overnight deposits, which appliesfor compensation of required reserves in MDL, the expensesincurred by the NBM have been reduced almost by a half.

Chart 3.6: Evolution of the official exchangerate of MDL/USD and the volume of dailytransactions of the NBM in 2012

-12

-8

-4

0

4

8

12

16

20

24

28

02/0

1/12

23/0

1/12

13/0

2/12

03/0

3/12

27/0

3/12

18/0

4/12

11/0

5/12

01/0

6/12

22/0

6/12

13/0

7/12

03/0

8/12

24/0

8/12

18/0

9/12

09/1

0/12

30/1

0/12

20/1

1/12

11/1

2/12

USD, million

11.60

11.70

11.80

11.90

12.00

12.10

12.20

12.30

12.40

12.50

12.60MDL/USD

Domestic interbank NBM turnover SWAP for saleSWAP purchase Exchange rate

Source: NBM

Intervention on domestic foreign exchange market

The NBM has intervened on the domestic foreign exchangemarket during 2012 as a buyer of foreign currency, in the contextof the monetary policy promoted by the NBM and to ensure theforeign exchange reserves consolidation.


In 2012, the National Bank of Moldova bought foreign currencyin the net amount of USD 310.1 million. At the same time,during the reporting year were performed swaps totaling USD20.0 million, including USD 10.0 million - buying swaps andUSD 10.0 million - selling swaps (Chart 3.6).

3.2 The results of monetary and exchangerate policy during 2012

Among the many accomplishments during the past few years, itshould be mentioned the gradual reduction in the annual rateof inflation, after 19 years, it recorded for the third consecutiveyear a level of a single digit, while in 2012, during the first 11months, it fell within the range of ± 1.5 percentage points of the5.0 percent target.

Expectations of global economic environment, increased volatil-ity on the international financial and foreign exchange market,exchange rate dynamics of the national currency, overlappingwith decreasing economic growth rates during 2012, have re-sulted in a slowdown of the inflation process in the Republic ofMoldova. The euro zone sovereign debt crisis induced substan-tial tensions globally and regionally. Due to increased exposureof the Moldovan economy to macroeconomic disturbances inthe Member States of the European Union, both the domesticand external demand were affected during 2012. Thus, theslowdown in the economic activity during 2012 was the mainfactor that caused the disinflationary pressures and influencedthe monetary policy decisions.

The inflationary pressures during 2012 were caused by thefluctuations in oil prices on the international market, increasedelectricity tariffs and food prices as a result of drought con-ditions in the summer of 2012 in both the country and theregion.

Thus, since November 2011, the NBM has decided to promotea monetary policy aimed at preventing the intensification ofdisinflationary pressures and avoiding the risk of recording aninflation rate below the lower limit of the range of the target,initiating a prudent trend to reduce the monetary policy interestrate by making two consecutive decreases by 0.5 percentagepoints, and respectively by 1.0 percentage points (the latterbeing applied since January 6, 2012).

Within the first meeting of the Council of Administration of theNBM in 2012 (January 26, 2012), based on the assessment


results of the balance of risks to the inflation outlook in themedium term, it was decided to decrease the monetary policyinterest rate by 2.0 percentage points from 8.5 to 6.5 percentannually, and to decrease the interest rate on both the overnightloans and overnight deposits from 11.5 percent to 9.5 percentand from 5.5 percent to 3.5 percent, respectively.

This decision was aimed at adjusting the domestic economicenvironment to the instability and uncertainty in the externalmacroeconomic setting. Another goal was to stabilize the domes-tic demand, which would directly create premises to moderatethe disinflationary pressures within their range and to ensurea consistent set of real monetary conditions to strengthen theconvergence of the inflation rate to the target in the mediumterm and to further support the lending process, thus boostingthe domestic demand.

Within the meeting of the Council of Administration of the NBMof February 23, 2012, due to the persistence of deflationaryrisks caused by the imminent risk of lower economic activityand domestic demand, and due to the continued deteriorationof expectations on developments in the global economic activity,was decided to reduce the monetary policy interest rate by 2.0percentage points, from 6.5 percent to 4.5 percent. At the sametime, it was a decision to reduce the interest rate on overnightloans from 9.5 percent to 7.5 percent and the interest rateon overnight deposits from 3.5 percent to 1.5 percent. Therespective rates of the monetary policy instruments were keptat this level until the end of 2012.

The analysis of the determinant factors of the inflationary pro-cess in the Republic of Moldova during 2012 highlighted thenon-monetary factors as well, which are outside the sphereof influence of the monetary policy promoted by the NBM.This was confirmed by the evolution of the annual inflationrate observed during the entire analyzed period, along withthe deepening sovereign debt crisis and recession in the euroarea and worldwide, which affected the global demand andinternational prices and directly influenced the growth of thedomestic economic activity.

In order to ensure coherent monetary conditions aimed atachieving the inflation rate convergence to the target in themedium term in the context of boosting domestic demandthrough the support of lending to the real economy, the NationalBank of Moldova has maintained the required reserve ratioattracted in MDL and foreign currency at the level of 14.0percent throughout 2012.

This decision was aimed at anchoring the inflation expectationsin terms of strengthening the prospects of keeping inflation


within the range of ± 1.5 percentage points to 5.0 percenttarget.

A thorough management of liquidity in the banking system hasbeen adapted to ensure proper functioning of the money market,maintaining the balance between price stability and nationaleconomic recovery.

Dynamics of monetary indicators

During 2012, the monetary indicators remained on an upwardtrend. The slowdown in their growth rate in June - December2011 continued until June 2012, the next period the evolutionof monetary indicators was characterized by the amplificationof the growth rates. The behavior of all monetary aggregateswas similar during 2012.

Chart 3.7: Evolution of M2 money supplycomponents (%, increase versus the samemonth of the previous year)

5

7

9

11

13

15

17

19

21

23

25

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11

3/ 1

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9/ 1

110

/ 11

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112

/ 11

1/ 1

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12

3/ 1

24/

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5/ 1

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12

7/ 1

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9/ 1

210

/ 12

11/ 1

212

/ 12

Money supply M2 Monetary aggregate M0Balance of deposits in MDL

Source: NBM

Money supply

During January-December 2012, the money supply (M2)8 in-creased by 23.5 percent, compared to the increase of 14.1 per-cent recorded in 2011 (Chart 3.7). The M2 aggregate dynamicsincreased throughout the year, particularly the growth rateshave increased in the period of July-December 2012, peaking inNovember 2012 when recorded a 23.7 percent growth. Moneysupply components have recorded positive developments, thedeposits in national currency increased by 24.6 percent com-pared to 2011 and the money in circulation - by 21.9 percent.

Chart 3.8: Dynamics of main componentsof M3 money supply (%, increase versusthe same month of the previous year)

0

5

10

15

20

25

1/11

2/11

3/11

4/11

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/11

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1210

/12

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/12

Money supply M3 Deposits in national currencyDeposits in foreign currency

Source: NBM

The deposits in MDL recorded an upward trend, the highestgrowth rates were recorded during September - December 2012,with a maximum increase of 24.6 percent in the last month ofthe reporting year. Money in circulation recorded a positivedevelopment throughout the year, its growth rate increased inSeptember-December 2012, reaching a maximum growth rateof 22.8 percent in November 2012.

At the same time, the growth of money supply (M3)9 increasedby 20.8 percent in 2012 versus the 10.6 percent increase regis-tered in 2011 (Chart 3.8).

The depreciation of MDL against the USD during 2012 con-tributed to an increase of deposits in foreign currency (expressed

8Money supply M2 includes the currency in circulation (M0), deposits inMDL and money market instruments

9Money supply M3 includes money supply M2 and deposits in foreigncurrency of residents expressed in MDL.


in MDL) by 14.8 percent, while their growth in USD for thesame period was 11.5 percent - USD 125.1 million.

The growth rate of deposits in foreign currency expressed inMDL was moderate during the period of January to October2012. The growth rate accelerated during November - Decem-ber, so that recording in the last month of the year a maximumgrowth rate of 14.8 percent.

In 2012, the deposits in national currency recorded an increasegreater than M0 - 24.6 percent (in 2011 they increased by 18.7percent), contributing directly to the increase of M2.

The share of term deposits in total deposits in MDL in wasof 66.0 percent December 2012, up by 3.5 percentage pointscompared to December 2011. This rearrangement within thestructure of deposits in MDL shows that the level of savingincreases from both legal entities and from individuals.

The total volume of term deposits attracted by banks in nationalcurrency during 2012 decreased by MDL 1491.7 million, whilethe volume of deposits in foreign currency (recalculated in MDL)decreased by MDL 31.3 million. However, the balance of sightdeposits with banks increased by MDL 845.4 million during thereporting year. As a result, the share of deposits in nationalcurrency in total deposits increased by 2.0 percentage points,from 57.8 percent in 2011 to 59.8 percent in 2012.

The decrease of term deposits in national currency by 6.4 per-cent was due to lower volume of term deposits of individualsby MDL 754.4 million (5.7 percent) and the volume of termdeposits of legal entities by MDL 737.3 million (7.1 percent).

During 2012, the volume of term deposits in foreign currencyregistered a decreasing trend. Expressed in USD, these de-creased by 3.3 percent (USD 47.1 million), expressed in MDL,the volume of deposits in foreign currency decreased by MDL31.3 million (0.2 percent) as a result of lower volume of newdeposits of individuals by MDL 2949.2 million (20.0 percent)and increased volume of new deposits of legal entities by MDL2917.9 million (by 2.4 times).

Credits market

Chart 3.9: Evolution of credits in the econ-omy (%, increase versus the same monthof the previous year)

7

9

11

13

15

17

19

21

23

1/11

2/11

3/11

4/11

5/11

6/11

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111

/11

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124/

125/

126/

127/

128/

129/

1210

/12

11/1

212

/12

Total In national currency In foreign currency

Source: NBM

In 2012, the total balance of credits granted to economy10

increased by 16.1 percent compared to 2011, higher as com-pared to the 15.0 percent increase recorded in the previous

10Starting from July 2012, according to the IMF methodology, the inter-bank credits, the credits granted to the Government and public institutionsare excluded from the total of credits granted to the economy (including theinterest rate calculated on credits).


year. This increase was driven mainly by the evolution of thecomponent in national currency (20.1 percent). At the sametime, the growth rate of the component in foreign currency wasmore temperate (11.1 percent). The dynamics of the balanceof granted credits was influenced by various factors, includingfavorable conditions of supply of new credits with interest ratessteadily falling for both the private sector and the population. Itshould be mentioned that the lower costs of new granted creditshave also boosted the demand for credits during the reportingperiod (Chart 3.9).

At the end of 2012, the balance of credits granted to legal

Chart 3.10: The balance of credits grantedto the economy (%, increase versus thesame month of the previous year)

-35

-25

-15

-5

5

15

25

35

1/11

2/11

3/11

4/11

5/11

6/11

7/11

8/11

9/11

10/1

111

/11

12/1

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122/

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124/

125/

126/

127/

128/

129/

1210

/12

11/1

212

/12

Total Loans to individuals Loans to legal entities

Source: NBM

entities registered a positive growth rate of 25.8 percent, basedon a more pronounced increase of the component in nationalcurrency (35.6 percent), the component in foreign currencyrecording a more modest rate of 16.5 percent. As a resultof changes in the calculation methodology11, the dynamics ofthe balance of credits granted to households (Chart 3.10) wasnegative, declining by 28.9 percent.

New granted loans

In 2012, the development of new loans registered a negativetrend, their volume declined by 9.8 percent (to the level ofMDL 26694.0 million). Although the interest rates were steadilydeclining in 2012, the economic activity, which was mitigatedby the agricultural crisis and unfavorable external factors, hasadversely affected the demand for loans. Dynamics of interest

Chart 3.11: Dynamics of the volume andaverage rates of new loans granted in thenational currency

0

500

1000

1500

2000

2500

1/11

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3/11

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/12

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/12

MDL, million

0

2

4

6

8

10

12

14

16

18%

Volume of credits in national currencyAverage interest rate on credits in national currency

Source: NBM

rates and the volume of lending were conditioned by method-ological changes made since July 2012 in the determination andcalculation of interest rates applied by the banks of the Republicof Moldova12.

The negative trend caused by the stagnation of trade in goodsand services was characteristic only for the loans granted inforeign currency, by 26.6 percent less, while the volume ofloans granted in national currency was MDL 16541.4 million,increasing by 4.8 percent (Chart 3.11).

Chart 3.12: Dynamics of the volume andaverage rates of new loans granted in theforeign currency

0

400

800

1200

1600

2000

2400

1/11

2/11

3/11

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5/11

6/11

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/12

MDL, million

0

2

4

6

8

10

12%

Volume of credits in foreign currencyAverage interest rate on credits in foreign currency

Source: NBM

In 2012, the loans granted to legal entities in national currencyincreased by 1.0 percent, up to the level of MDL 13024.9

11According to the Instruction on the procedure for filling out by the licensedbanks of the Report on monetary statistics, which was amended and com-plemented by the Decision no.243 of October 23, 2012 of the Council ofAdministration of the National Bank of Moldova, in force as on November 1,2012.

12According to the Instruction on reporting the interest rates applied bythe banks of the Republic of Moldova, approved by the Decision no.304 ofDecember 22, 2011 of the Council of Administration of the National Bankof Moldova (Official Monitor of the Republic of Moldova no. 238-242,Art.2151), including further amendments and completions.


million, representing 78.7 percent of total loans in MDL. Al-though holding a small share in total lending, the loans grantedto households recorded a significant increase of 22.0 percentcompared to 2011, up to the level of MDL 3516.5 million.

The loans granted in foreign currency recorded negative growthrates for the both customer segments. Thus, the loans grantedin foreign currency to legal entities decreased by 27.0 percent,up to the level of MDL 9916.0 million (Chart 3.12). The legalentities held a share of 97.7 percent of total loans, the dynamicsof which has been influenced by the financing of foreign tradeoperations.

Interest rates and monetary policy transmission mechanism

With the base rate adjustment by the Council of Administrationof the NBM, the interest rates applied by banks in dealing withcustomers have recorded a downward trend for both loans anddeposits, being in a continuous decrease since 2010 (Chart3.13).

Chart 3.13: Average interest rates in MDL(%)

4

6

8

10

12

14

16

1/11

2/11

3/11

4/11

5/11

6/11

7/11

8/11

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111

/11

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122/

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128/

129/

1210

/12

11/1

212

/12

New loans New term deposits NBM base rate

Source: NBM

The average rate on new loans granted in national currency in2012 recorded the level of 13.34 percent, by 1.03 percentagepoints lower than the level recorded in 2011. This trend wasconsistent in both categories of customers. Thus, the rate onloans granted to individuals recorded a level of 15.29 percent,down by 1.39 percentage points, while the rate on loans grantedto legal entities recorded a level of 12.81 percent, down by 1.04percentage points. At the same time, the interest rates on loansgranted in national currency reached in December 2012 a newhistoric low level of 11.98 percent, a fact that didn’t applyto interest rates on loans granted in foreign currency, whichrecorded a level of 8.32 percent.

In contrast, the average rate of the yields for bank term place-ments in national currency increased by 0.05 percentage points,reaching the level of 7.59 percent (Chart 3.14). The interestrate on deposits of legal entities decreased by 0.18 percentagepoints, to the level of 4.95 percent, while the interest rate ofdeposits of individuals increased by 0.20 percentage points, upto the level of 9.62 percent. In December 2012, the average

Chart 3.14: Dynamics of the volume andaverage rates of term deposits in nationalcurrency

0300600900

1200150018002100240027003000

1/11

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MDL, million

012345678910%

Volume of new attracted deposits in national currency

Average interest rate on new attracted deposits in national currency

Source: NBM

interest rate on new deposits attracted in national currencyremained almost unchanged compared to 2011 (8.44 percent).

During 2012, the average interest rates on deposits in nationalcurrency increased from 7.06 percent in January (the minimumlevel in 2012), up to the maximum level of 8.44 percent inDecember 2012. In the reporting period, the interest rates ondeposits in foreign currency recorded the same trend, increasingfrom 4.03 percent in January to 4.68 percent in December.


Contrary to the evolution of the interest rates on deposits, theinterest rate on new granted loans recorded a downward trendthroughout 2012. Thus, the maximum interest rate on loansin national currency amounted to 14.71 percent in January2012, reaching at the end of the year the minimum historicalvalue of 11.98 percent. The interest rates on new loans in

Chart 3.15: Dynamics of the volume andaverage rates of term deposits in foreigncurrency

0

400

800

1200

1600

2000

2400

1/11

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MDL, million

0

1

2

3

4

5

6%

Volume of new attracted deposits in foreign currency

Average interest rate on new attracted deposits in foreign currency

Source: NBM

foreign currency had a similar evolution, with some moderatedeviations. The maximum interest rate on loans in foreigncurrency was recorded in February 2012, representing 9.86percent and the minimum interest rate was recorded in October2012, representing 7.64 percent, increasing consecutively in thelast two months of 2012 and reaching the level of 8.32 percentin December 2012.

The average annual interest rate on term deposits in foreigncurrency increased by 0.61 percentage points from 2011, repre-senting 4.30 percent in 2012 (Chart 3.15). This upward trendwas characteristic for all customer segments, the interest ratefor legal entities was 3.83 percent, up by 0.41 percentage points,and the interest rate for individuals was 4.49 percent, up by0.76 percentage points compared to 2011.

The average annual interest rate on new loans in foreign cur-rency amounted to 8.28 percent in 2012, compared to 8.75percent recorded in 2011, due solely to the changes in theinterest rate for legal entities, which decreased to 8.25 percentcompared to 2011, when it constituted 8.70 percent.

In 2012, the favorable conditions, like the excessive liquidityand credit risk mitigation, allowed banks to contribute to thebanking margin decrease.

The decrease in banking margin (the difference between theaverage interest rates on loans and deposits) was mainly atthe expense of the evolution of the annual interest rates onboth new attracted deposits and new granted loans. Attractivelending conditions in the real sector and the initiative of licensed

Chart 3.16: Evolution of banking margin onoperations in national and foreign currency(p. p.)

5.75

6.82

8.69

5.65

2.873.72

6.255.94

5.806.50

3.98

5.06

6.49

4.90

2.38

5.92

6.38

7.72

5.89 4.87

2

3

4

5

6

7

8

9

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Banking margin on operations in national currencyBanking margin on operations in foreign currency

Source: NBM

banks to attract more new deposits marked 2012 and influenceddirectly the change in the margin.

Thus, the banking margin for operations in national currencyfell by 1.08 percentage points, to the level of 5.75 percentagepoints and the banking margin for operations in foreign currencyamounted to 3.98 percentage points or by 1.08 percentagepoints less than in 2011 (Chart 3.16).


3.3 Monetary market

The primary market of state securities

Acting as the fiscal agent of the state in organizing the placementand redemption of state securities (SS) in the form of bookentries, the National Bank of Moldova carried out 166 statesecurities issuances during 2012.

Following the need to increase the budget deficit funding for2012 at the expense of domestic sources, the Ministry of Finance

Chart 3.17: The volume of supply, demandand sales of SS (million, MDL)

6129.06991.06718.0

9079.7

12555.211249.8

6987.36404.46396.1

0

2000

4000

6000

8000

10000

12000

14000

2010 2011 2012Volume of supply Volume of demand Sales volume

Source: NBM

increased the supply of state securities placement through auc-tions, the weekly volume of treasury bills (T-bills) for placementincreased from MDL 127.0 million to MDL 136.0 million andthat of state bonds (SB) increased from MDL 8.0 million to MDL12.0 million. Also, the intention of the Ministry of Finance toincrease the average maturity of the SS issued in the primarymarket determined the modification of T-bills structure towardsincreasing the volume of T-bills with the maturity of 182 and364 days and decreasing slowly the volume of T-bills with thematurity of 91 days.

Chart 3.18: Monthly dynamics of state se-curities in primary market auctions in 2012

10.83

7.75

5.835.79

5.67 5.526.19 5.99

5.045.46

5.004.98

0

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MDL, million

0

2

4

6

8

10

12%

Volume of supply Volume of demandVolume of sold SS Interest rate

Source: NBM

The demand for state securities recorded a maximum level ofMDL 12555.2 million and the demand/supply ratio being 1.8(1.4 in 2011). The Ministry of Finance put into circulation,through auctions, state securities amounting to MDL 6987.3million, slightly below the target amount of MDL 6991.0 millionas a result of placing partially the supply of state bonds (Chart3.17).

Chart 3.18 shows the monthly dynamics of the volume of supply,demand and sales of state securities during 2012 and the evolu-tion of the average monthly interest rate on securities placed.The gradual reduction of the NBM monetary policy interest Chart 3.19: The structure of SS issuances

by types in 2011

2011

2 years SB0.6%

91 days T-bills35.5%

182 daysT-bills44.3%


Source: NBM

rate had as the effect the return of the downward trend of theinterest rate on SS, interrupted temporarily in mid-June for anepisodic growth that has been fully corrected in the followingmonths as a result of the strong position of the Ministry ofFinance not to allow essential growth in the interest rates onthe primary market for state securities.

Reduced yields on SS influenced downwards the non-bank in-vestor interest for SS. Thus, the value of purchased SS fell fromMDL 704.0 million in 2011 (11.0 percent of the total issued) toMDL 465.4 million in 2012 (6.7 percent of the total issued). Thevolumes of SS purchases by non-residents were insignificant.


During 2012, the Ministry of Finance offered for placement,through auctions, T-bills of 91 days, 182 days and 364 days andstate bonds with a maturity of 2 years.

Treasury bills with a maturity of 6 months were one of theplacements with the largest share - 42.8 percent, followed by

Chart 3.20: The structure of SS issuancesby types in 2012

2012

2 yearsSB

1.2% 91 days T-bills32.6%

182 daysT-bills42.8%


Source: NBM

those with a maturity of 3 months, with a share of 32.6 percent.The share of state bonds with floating rate with a maturity of 2years in total SS issued has doubled compared with 2011.

Chart 3.21: The dynamics of nominal inter-est rates on SS (%)

3

5

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9

11

13

15

4/01

/11

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/11

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/11

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4/12

/12

91 days T-bills 182 days T-bills 364 days T-bills

Source: NBM

The circulation of a greater volume of T-bills with a maturityof 364 days and state bonds as compared to that registered in2011 caused the average maturity of newly issued securities toincrease from 189 days in 2011 to 202 days in the reportingyear.

Interest rates on the state securities market experienced a pro-nounced downward trend at the beginning of the period, reflect-ing the lower monetary policy interest rate, and then continuedto be mainly in the upper part of the corridor determined by thestanding facilities interest rates (Chart 3.21).

Chart 3.22: Evolution of interest rates (%)

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Interbank credits/deposits Loans in economy

State securities Deposits attracted by banks

Source: NBM

At the last SS auctions of 2012, the average interest rates haverecorded values of 4.58, 4.93 and 5.94 percent annually formaturities of 91, 182 and 364 days respectively, or by 6.04, 7.31and 6.35 percentage points, respectively, less than the valuesrecorded at the end of 2011.

The average annual interest rate on state securities with thematurity up to one year traded in 2012, decreased to the levelof 6.09 percent annually compared to 11.42 percent annuallyin 2011.

The weighted average annual nominal interest rates on statesecurities, traded in the last two years in the primary marketauctions, are shown in Table 3.1 by maturity.

In 2011, the interest rates on state securities in the yieldshierarchy on the financial market exceeded significantly theinterest rates offered by banks on deposits, approaching moreand more in the second half of the year to the interest rateson loans granted in the economy, while in 2012, the interestrates on state securities were below the rates offered by bankson deposits, distancing significantly by the end of the reportingperiod (Chart 3.22).

Along with the SS placed through auctions, there have beenplaced by underwriting state bonds with floating interest rate(equivalent to the NBM base rate plus a margin), with thematurity of 1, 2 and 3 years in the amount of MDL 120.3 millionat face value.


The volume of state securities placed on the primary marketthrough auctions and underwriting, outstanding as on Decem-ber 31, 2012, recorded the value of MDL 3966.6 million at facevalue (Chart 3.23). At the selling-buying price it was MDL

Table 3.1: Weighted average annual nom-inal rates of interest on state securities bymaturity (%)

2011 2012QB 91 days 10.42 5.41QB 182 days 12.05 6.16QB 364 days 12.28 6.92SB 2 years 13.43 5.89

Source: NBMNote: For bonds are represented the effective interest rates.

Chart 3.23: Dynamics of the volume ofSS in circulation at the end of the period(million, MDL)

3222.93493.1 3966.6

0

500

1000

1500

2000

2500

3000

3500

2010 2011 2012

Source: NBM

3816.1 million, increasing by MDL 560.1 million at the end ofthe reporting year compared to 2011.

The secondary market of state securities

The yields curve related to SS selling-buying operations on thesecondary market recorded a downward trend during the year,from 10.51 percent in January to 4.59 percent in November, atrend similar to the interest rates on SS in the primary market.The average annual yield on the secondary market of SS fell by5.66 percentage points compared to 2011, reaching the level of5.67 percent.

The value of SS transactions recorded on the secondary marketin 2012 increased by 3.7 times compared to 2011, reaching thelevel of MDL 98.1 million as a result of increasing the numberand value of transactions between banks and customers (54.6percent of total) and among customers of the same primarydealer (1.2 percent of total).

The most traded securities were those with residual maturityless than one year, namely in the range of 28 to 91 days, theweight of which represented 71.0 percent of total transactionswith SS.

The dynamics and evolution of the volume and of the weightedaverage interest rate compared to 2011 is represented in theChart 3.24.

Chart 3.24: Dynamics of indicators on thesecondary market

0

4

8

12

16

20

24

28

32

36

40

1 2 3 4 5 6 7 8 9 10 11 12

Sol

d S

S (

MD

L, m

illio

n)

0

2

4

6

8

10

12

14

16

Wei

ghte

d av

erag

e in

tere

st r

ate

(%)

The volume - 2011 The volume - 2012The interest rate - 2011 The interest rate - 2012

Source: NBM

The downward trend in yields on state securities was the im-petus for increased sales of SS from the customer securitiesportfolio, due to lower investor interest for this type of invest-ment, which led to a decrease of 5.9 percent in the averageannual rate of SS at maturity by corporate and institutionalinvestors (joint ventures, microfinance institutions, insurancecompanies), compared to 6.5 percent recorded in 2011.

Interbank money market

During 2012, the interbank market has registered a positivedevelopment, especially the interbank loans/deposits, while theSS secondary market has seen a lower development, amountingto only 5.6 percent of total transactions. REPO operations withsecurities between banks were not recorded.


The total volume of interbank transactions in 2012 amountedto MDL 3232.7 million, doubling compared with 2011.

Similarly to previous years, the interbank loans/deposits heldthe highest share in the turnover of interbank transactions in2012, amounting to 94.4 percent in total transactions.

The interbank loans/deposits segment followed an increase inthe number of transactions and in the number of participants,the total value of interbank loans/deposits increasing to MDL3050.8 million, by 2.1 times more compared to 2011. Theincrease in the volume and number of transactions on theinterbank loans/deposits market, especially in the second half ofthe reporting year, was due to the short-term liquidity shortagein some banks.

The most important volume of interbank loans and deposits wasrecorded on the minimum maturity of the market, the share ofovernight transactions representing 60.0 percent of the total.

The average monthly interest rates on interbank loans/depositsrecorded lower values in the reporting period, on the backdropof lower interest rates on NBM monetary instruments in early2012.

The monthly average interest rate during 2012 ranged fromone month to another, recording values between the maximumof 10.00 percent annually (January) and the minimum of 3.24percent annually (July).

The average annual interest rate on interbank loans/depositswas 5.46 percent annually, by 3.40 percentage points below thevalue recorded in 2011.

The average weighted term of transactions concluded amongbanks in 2012 accounted for 17 days, by 6 days more comparedto 2011.

Reference interest rates on interbank money market

The CHIBOR/CHIBID reference rate curve (indicative quota-tions of interest rates in the placement/attraction on the inter-bank market of funds in national currency) has taken over theNBM base rate adjustments.

CHIBOR/CHIBID quotations with maturity of two weeks (2W)recorded a downward trend at the beginning of the year. Startedimmediately after the decision of the NBM to reduce the mon-etary policy interest rate in December 2011, their downwardmovement reflected the successive reductions in the monetary


policy interest rate operated during the first quarter of 2012, buttheir amplitude was lower than that of the base rate. During therest of the year, the reference interest rates remained broadlystable, recording slight changes in both directions.

As a result of these developments, CHIBOR 2W and CHIBID2W quotations decreased by 3.13 and 2.88 percentage pointsrespectively compared to the values recorded at the end of 2011.As on December 31, 2012 the CHIBOR 2W was 6.70 percentannually and CHIBID 2W was 2.76 percent annually (Chart3.2).

Activity of primary dealers in the state securitiesmarket

During 2012, there were 12 primary dealers in the state se-curities market, who, in accordance with the agreements onthe performance of the functions of the primary dealer ondematerialized SS market concluded with the NBM, contributedto the placement of state securities on the primary market andto the provision of liquidity in the secondary market.

Chart 3.25: Structure of SS purchases atauctions on the primary market by cate-gories of participants

90.586.587.8

6.611.09.72.92.52.6

0%

20%

40%

60%

80%

100%

2010 2011 2012

Primary dealers Non-bank investors Participating banks

Source: NBM

The volume of requests submitted by primary dealers at theauctions of state securities placement in 2012 amounted to MDL11922.4 million.

In 2012, the primary dealers purchased securities in the amountof MDL 6572.3 million, which represented 94.0 percent of theoffer of the Ministry of Finance (in 2011 this indicator was 91.1percent). Chart 3.26: Selling-buying transactions per-

formed by the primary dealers on the sec-ondary market (million, MDL)

47.3

22.2

34.3

53.6

43.3

4.1

0

25

50

75

2010 2011 2012

Bank-bank Bank-customer

Source: NBM

The primary dealers purchased on their behalf 90.5 percent (orMDL 6321.5 million) of the total traded securities, the volume ofSS purchased by non-bank investors decreasing both in weightand absolute value (Chart 3.25).

In 2012, the activity of primary dealers on the secondary mar-ket for state securities has increased significantly, especially intransactions such as bank-client, which registered a volume ofMDL 53.6 million (54.6 percent of the total volume of transac-tions with state securities) compared to MDL 4.1 million (18.5percent) recorded in 2011.


Records of securities in the book-entry system withthe NBM

The securities book-entry system, which is administrated by theNational Bank of Moldova, is an inseparable component of thefinancial market infrastructure.

Its efficient operation allows a safe, accurate and timely con-duct of securities transactions, to cover all securities-relatedoperations stored in the BES, to serve as a support for themonetary policy of the National Bank of Moldova and to provideparticipants with full service custody.

The BES stores the state securities issued by the Ministry ofFinance and those issued by the National Bank of Moldovaand ensures the settlement of transactions with these financialinstruments. In this regard, the system has functionalities forrecording the results of financial instruments issues, accountmanagement and management of payments related to outstand-ing issues.

On December 31, 2012 the total amount of the securities reg-istered in BES constituted MDL 10076.5 million at face value,which by issuers are as follows:

I. Minister of Finance – SS in the total amount of MDL 6332.5million, including:

• MDL 3966.6 million or 62.6 percent are SS issued viaauctions and underwriting on the primary market;

• MDL 279.4 million or 4.4 percent are SS issued for Bancade Economii S.A. according to the Law no.190 of Septem-ber 30, 2011 on additional measures to ensure financialstability;

• MDL 2086.5 million or 33.0 percent are SS issued anddelivered to the National Bank of Moldova.

II. National Bank – NBM Certificates (NBC) in the total amountof MDL 3744.0 million.

The total amount of SS recorded in the book-entry system atface value is divided by holders as follows:


Banks

• as on 31.12.2012 - MDL 3987.5 million

• as on 31.12.2011 - MDL 3398.8 million

Other investors (including the Deposit Guarantee Fund in thebanking system)

• as on 31.12.2012 - MDL 258.5 million

• as on 31.12.2011 - MDL 466.9 million

National Bank of Moldova (SS delivered to the NBM as a resultof the conversion of loans previously granted to the State andsubsequently reissued)

• as on 31.12.2012 - MDL 2086.5 million

• as on 31.12.2011 - MDL 2274.2 million

Chart 3.27: The structure of state securitiesin circulation in the holders’ profile as on31.12.2011

31.12.2011

National Bank of Moldova 37.0 %

Banks 55.4 %

Other investors

7.6%

Source: NBM

Chart 3.28: The structure of state securitiesin circulation in the holders’ profile as on31.12.2012

31.12.2012

National Bank of Moldova33.0%

Banks62.9%

Other investors

4.1%

Source: NBM

On December 31, 2012 within the structure of SS registeredin BES by holders, as compared to December 31, 2011, thefollowing changes have occurred:

- the share held by banks has increased as a result of increasedvolume of SS purchases on the primary market;

- the share held by the NBM has decreased as a result of thedownward trend in interest rates on SS issued and deliveredfollowing the conversion of loans previously granted to thegovernment and the final redemption by the Ministry of Financeof the securities from the NBM portfolio in the volume of MDL150.0 million, according to the Law no.282 of November 27,2011 on the State Budget for 2012;

- the share held by non-bank investors has decreased as a resultof the population preferences for placements with yields higherthan those of SS.

The NBM Certificates in the total amount of MDL 3719.0 millionwere recorded in banks portfolio, while the amount of MDL 25.0million – in the other investors portfolio.

During the reference year, 7086 operations in the amount ofMDL 228299.3 million were recorded in the book-entry systemof the NBM, of which:


• Operations on primary market (new issues) – MDL 113940.0million;

• Redemption by the Minister of Finance of SS at maturity –MDL 15735.8 million;

• Redemption by the National Bank of Moldova of NBMCertificates at maturity – MDL 97181.4 million;

• Selling - buying operations – MDL 183.1 million;

• Operations of pledging – MDL 1213.3 million;

• Open market operations – MDL 45.7 million.

In 2012, DvP (delivery versus payment) held a share of 99.4percent of total transfers, FoP (free of payment) transfers - 0.6percent, the latter being made between banks and the NBM onoperations of pledging and transfers between banks and theircustomers.

3.4 Activity of the National Bank ofMoldova as fiscal agent of the state

Government debt to the National Bank of Moldova

In accordance with the Agreement on the balance of state debtcontracted earlier from the National Bank of Moldova for 2012,concluded between the Ministry of Finance and the NationalBank of Moldova on November 24, 2011, the National Bankof Moldova conducted during 2012 from its own portfolio re-issuance of state securities that reached the maturity.

State securities had typically maturities of 91 days and wereobtained in the NBM portfolio at the average interest rates onSS with the same maturity, sold at recent auctions of securitiesplacement on the primary market, which have been in the rangeof 4.42-10.33 percent annually.

On December 31, 2012 the state debt to the National Bank ofMoldova, constituted entirely of state securities, totaled MDL2063.4 million (purchase price), decreasing by MDL 150.0 mil-lion compared to 2011 as a result of final redemption (withoutprior re-issuance) by the Ministry of Finance of previously issuedstate securities.

The weighted average interest rate on SS held in the portfolioas of December 31, 2012 recorded the level of 4.50 percent


annually and the average maturity of state securities in theportfolio on the last day of the reporting period constituted 44days.

The market value of state securities held in NBM portfolio as ofDecember 31, 2012 constituted MDL 2075.4 million.

State deposits with the National Bank of Moldova

Under the Agreement between the National Bank of Moldovaand the Ministry of Finance of December 5, 2007, whose objectis the provision of services by the NBM to the Ministry of Finance,and the provisions of the Regulation on acceptance of depositsfrom the Ministry of Finance, approved by the Decision no.358 of the Council of Administration of the NBM of December28, 2006, the Ministry of Finance has placed in 2012 with theNational Bank of Moldova term deposits in MDL with termsfrom 14 days to 6 months in the total amount of MDL 1375.0million.

Compared with 2011, the amount of deposits placed with theNBM in 2012 increased by MDL 926.0 million.

Deposits were placed at the base rate of the National Bank ofMoldova, variable during the deposit contract, which variedfrom 8.5 percent annually in January 2012 to 4.5 percentannually in December 2012.

The average weighted rate of deposits placed in 2012 was5.66 percent annually, decreasing by 3.02 percentage pointscompared with the average interest rate on deposits placed in2011.

The average term of deposits placed in 2012 constituted 28days, compared with 147 days in the previous year.

On December 31, 2012 the balance of term deposits of theMinistry of Finance placed with the National Bank of Moldovawas null.

3.5 Foreign Exchange Market

During 2012, the official nominal exchange rate of the na-tional currency against the U.S. dollar depreciated by 3.0


percent and against the EUR - by 6.1 percent compared to theend of 2011 (Chart 3.29).

The average official exchange rate of the national currencydepreciated against USD by 3.2 percent in 2012 and againstEUR appreciated – by 4.7 percent compared to the averageofficial exchange rate of the national currency in 2011.

Chart 3.29: Fluctuations of the official ex-change rate of MDL

10

12

14

16

18

01/1

002

/10

03/1

004

/10

05/1

006

/10

07/1

008

/10

09/1

010

/10

11/1

012

/10

01/1

102

/11

03/1

104

/11

05/1

106

/11

07/1

108

/11

09/1

110

/11

11/1

112

/11

01/1

202

/12

03/1

204

/12

05/1

206

/12

07/1

208

/12

09/1

210

/12

11/1

212

/12

MDL

against USD against EUR

Source: NBM

Chart 3.30: Contribution of the main trad-ing partners of the RM to the real effectiveexchange rate modification during 2012

Depreciation (-) /appreciation (+)

-1.8 -1.6 -1.4 -1.2 -1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4

Poland

United Kingdom

Greece

France

Austria

Netherlands

Lithuania

Russian Federation

Ukraine

Belarus

Romania

Bulgaria

Germany

Italy

Turkey

Hungary

China

percentage points

Source: NBM

Chart 3.31: Dynamics of the nominal andreal effective exchange rate of the nationalcurrency calculated based on the weight ofthe main trading partners for Dec.2007 –Dec. 2012

(Dec.2000-100%)

60%

80%

100%

120%

140%

160%

12/0

703

/08

06/0

809

/08

12/0

803

/09

06/0

909

/09

12/0

903

/10

06/1

009

/10

12/1

003

/11

06/1

109

/11

12/1

103

/12

06/1

209

/12

12/1

2

NEER REER

Source: NBM

The real effective exchange rate of the national currency(REER)13, calculated based on the ratio of major trading part-ners and the average exchange rates, depreciated by 3.8 percentas compared to December 2011.

Most of the major trading partners, except Ukraine, contributedto the depreciation of the real effective exchange rate, RussianFederation (by 1.63 percentage points) and Belarus (0.72 per-centage points) held the most significant contribution as a resultof less favorable developments on their domestic markets14

compared to that of the Republic of Moldova.

A number of factors, such as an excessive coverage of demandfor foreign currency from economic agents through the net sup-ply of foreign currency from individuals, massive flow of foreignloans, foreign exchange developments in foreign markets andthe NBM interventions on the domestic foreign exchange mar-ket, have influenced as a whole the trajectory of the nationalcurrency exchange rate against the U.S. dollar during 2012.

Overall, despite a global economic cooling in 2012, the domesticforeign exchange market was saturated with liquidity in foreigncurrency. On the backdrop of a relatively low demand of foreigncurrency from economic agents, the excess of foreign currencywas generated by a net supply of foreign currency from individ-uals (USD 2707.0 million), increasing by 13.0 percent and amassive net inflow of foreign loans and investments (USD 332.0million), increasing by 55.2 percent from 2011.

At the same time, the increase in the balance of current accountsand deposit in foreign currency of individuals and legal entitiesby USD 171.3 million or 14.6 percent compared to the end of2011 contributed to increased liquidity in foreign currency onthe domestic foreign exchange market.

In light of these developments, and in the limits of the monetarypolicy promoted during 2012, the NBM absorbed the surplusof foreign currency by purchasing the amount of USD 310.1million from the interbank foreign exchange market.

13calculated in comparison with December 200014the higher increase of domestic consumer prices, and the appreciation

or depreciation in smaller proportions of their currencies against the U.S.dollar.


Thus, the evolution of the exchange rate of the national currencyagainst the U.S. dollar in 2012 was divided into two periods –one of depreciation and one of appreciation.

In the first 8 months of 2012, the exchange rate of the nationalcurrency was positioned on an upward trend, despite an excessvolume of liquidity on the domestic foreign exchange market.

Chart 3.32: Coverage of net foreign cur-rency sales to legal entities by the net sup-ply of foreign currency from individuals andthe dynamics of the nominal exchange rateof the national currency against the U.S.dollar

99.9%

110.8%

100.2%

116.4%

139.5%

146.4%

94.1%

95.5%

94.2%

95.9%

94.4%

87.6%

95.7%

104.6%

99.2%

89.6%

87.7%

91.3%92.1%

88.4%

96.3%

94.1%

98.6%

111.9%

20%

40%

60%

80%

100%

120%

140%

160%

01/11 03/11 05/11 07/11 09/11 11/11 01/12 03/12 05/12 07/12 09/12 11/1211.1

11.3

11.5

11.7

11.9

12.1

12.3

12.5MDL/USD

Net sales of foreign currency to legal entities

Coverage ratio of net sales of foreign currency by legal entities through net supply offoreign currency from individualsExchange rate MDL/USD at the end of the period

Source: NBM

Chart 3.33: The growth rate of net supplyof foreign currency from individuals and netsales of foreign currency to legal entitiescompared to the same period of the previ-ous year

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

I/11 II/11 III/11 IV/11 I/12 II/12 III/12 IV/12

The growth of the net foreign currency supply of individuals compared tothe same period of the previous yearThe growth of the net foreign currency sales to legal entities compared tothe same period of the previous year

Source: NBM

In this respect, until autumn, the net volume of foreign currencyfrom individuals (USD 1778.9 million) exceeded the demand forforeign currency from economic agents (USD 1691.4 million)by 5.2 percent, there were recorded substantial net inflows ofloans and investments (USD 176.1 million), the balances incurrent and deposit accounts of individuals and legal entitiesincreased by USD 36.4 million. However, the exchange rate ofthe national currency rose to a maximum of MDL 12.548915

per USD over the last 2 years (August 2010 - August 2012),depreciating by 7.1 percent compared to the end of 2011.

The depreciation was due to the purchases of foreign currencyin the amount of USD 168.7 million by the NBM in the contextof its monetary policy promoted, which was oriented towards re-ducing the deflationary pressures and to strengthen the foreignexchange reserves.

It is also evident that the trend of depreciation of the exchangerate of the national currency and the upward trend of thebalance of availability in foreign currency have traveled similarpaths, reaching their peak in midsummer.

Later, during the last 4 months of 2012, the exchange rateof the national currency has reversed the trend, appreciatingby 3.9 percent compared to the maximum16recorded in lastmonth of summer. The appreciation of the national currencywas registered under a net supply of foreign currency fromindividuals (USD 928.1 million), which supplied in significantproportions (113.1 percent) the reduced demand for foreigncurrency from economic agents (USD 820.3 million). Thus,compared to the same period of 2011, the net supply of foreigncurrency from individuals increased by 12.6 percent to thedetriment of net sales of foreign currency to legal entities, whichdeclined by 8.7 percent.

Chart 3.34: Dynamics of disposable fundsin foreign currency and the official nominalexchange rate of MDL against USD during2012

150

185

220

255

290

325

360

395

430

465

500

01/12 02/12 03/12 04/12 05/12 06/12 07/12 08/12 09/12 10/12 11/12 12/12

million USD

11.2

11.4

11.6

11.8

12.0

12.2

12.4

12.6MDL/USD

Available funds in foreign currency Exchange rate MDL/USD

Source: NBM

At the same time, the net flow of loans and massive investmentsin the amount of USD 155.9 million and the increase in thebalances of current accounts and deposits in foreign currencyof individuals and legal entities by USD 134.9 million havecontributed to the increase in the volume of availability inforeign currency during the last 4 months of 2012.

15as on August 7, 201216MDL 12.5489 per USD as on August 7, 2012


Therefore, the NBM intervened by purchasing the amount ofUSD 141.4 million, mitigating the appreciation of the nationalcurrency.

By the end of 2012, the balance of availability in foreign cur-rency from licensed banks amounted to USD 392.9 million,increasing by USD 75.8 million compared to the end of August2012 and representing 21.0 percent of total net balance-sheetassets in foreign currency.

At the end of 2012, official reserve assets stood at the level ofUSD 2515.0 million, increasing by 28.0 percent from the end of2011, covering about 4.717 months of imports (Chart 3.35).

The growth of the official reserve assets was mainly conditionedby the purchases of foreign currency in the amount of USD310.1 million by the NBM on the interbank foreign exchangemarket and by the receipt by the NBM from the IMF of 2 install-ments within the Extended Financing Mechanism (equivalent of

Chart 3.35: Evolution of foreign exchangereserves expressed in months of goods andservices imports

900

1100

1300

1500

1700

1900

2100

2300

2500

2700

01/0

9

03/0

9

07/0

908

/09

12/0

9

02/1

003

/10

04/1

005

/10

07/1

0

09/1

0

11/1

0

01/1

1

03/1

1

05/1

1

07/1

1

09/1

1

11/1

1

01/1

2

03/1

2

05/1

2

07/1

2

09/1

2

11/1

2

0.0

0.8

1.6

2.4

3.2

4.0

4.8

Official reserve assets, mil. USD Official reserve assets in months of import of goods and services (right scale)

Source: NBM

USD 106.6 million) and within the Extended Credit Mechanism(equivalent of USD 48.03 million).

At the same time, the official reserve assets have been strengthenby the receipt by the Ministry of Finance from the EuropeanCommission of the third tranche of EUR 30.0 million (equivalentof USD 39.2 million) within the Agreement between the EuropeanCommission and the Government of the Republic of Moldova inthe amount of EUR 90.0 million, the tranches within the SectorPolicy Support Program in the Water Sector (EUR 12.03 million,equivalent of USD 14.8 million), Financial support programfor sectoral policies – Medicine (EUR 4.1 million, equivalent ofUSD 5.47 million), the grant received to overcome the droughtconsequences (EUR 3.15 million, equivalent of USD 4.16 mil-lion). The Ministry of Finance has also received from the WorldBank a grant in the amount of USD 30.5 million within theCompetitiveness Development Policy Operation Program and agrant of USD 6.8 million within the Program to Strengthen theEfficiency of the Social Assistance System.

The foreign exchange market of the Republic ofMoldova

The foreign exchange market of the Republic of Moldova in2012 indicates an upward trend in transactions carried out onthe domestic foreign exchange market against MDL.

17calculated based on the forecast of import of goods and services for 2013


The total turnover of traded foreign currencies against MDLin this period amounted to the equivalent of USD 14336.818

million, increasing by 17.0 percent compared to 2011 (TableA.12).

Within the structure of the total turnover, the foreign currencypurchases on the domestic foreign exchange market againstMDL was USD 7158.7 million, and sales - USD 7178.1 million.

The volume of foreign exchange transactions carried out onthe domestic foreign exchange market during 2012 registeredan upward trend, reaching in the fourth quarter the maximumamount of USD 4584.4 million. Domestic foreign exchangetransfer market operations were mainly driven by the trans-actions carried out by legal entities, although their economicperformance, being influenced by a worsening external eco-nomic and financial environment, especially in the euro area,led to a slight decrease in the volume of transactions on thedomestic foreign exchange market compared with 2011. Theresident banks (accounting for turnover increases by 2.9 times)and the NBM (by 3.2 times) recorded a notorious presence inthe transfer market in 2012, while the foreign exchange officesof the licensed banks (accounting for turnover increases by4.9 times) recorded a notorious presence in the cash foreignexchange market) (Table A.12).

During 2012, the U.S. dollar has maintained its dominant po-sition in both total turnovers of foreign exchange transactionsin the domestic foreign exchange market and in the foreignexchange transactions in the transfer market, the EUR holdingthe dominant position in the total turnover of foreign currencyexchange market in cash.

Both in 2012 and in 2011, in terms of total purchases of foreigncurrency on cash and transfer foreign exchange market, theeuro dominated (by 48.6 and 47.3 percent respectively) whilein terms of total sales, the U.S. dollar has dominated (by 60.4percent and 59.2 percent).

As compared to 2011, the foreign currency purchases of thelicensed banks on the domestic foreign exchange market in-creased by USD 1022.6 million in 2012 or by 18.0 percent (TableA.14). This increase was mainly due to increased purchases offoreign currency from resident banks - by USD 632.8 million(by 2.9 times) and from individuals - by USD 276.0 million (9.5percent). However, there was recorded a reduction of foreigncurrency purchases from legal entities - by USD 29.7 million(1.5 percent) and from the NBM - by USD 11.5 million (36.5

18The amount does not include the purchases/sales against MDL carriedout by the NBM with the Ministry of Finance.


percent), from non-resident banks - by USD 2.5 million (31.3percent) and from foreign exchange offices - by USD 0.6 million(21.2 percent).

Thus, the purchases of foreign currency by the licensed bankson the domestic foreign exchange market in 2012 were mademostly from individuals (47.7 percent), legal entities (29.1percent) and resident banks (14.5 percent).

Compared with 2011, the sales of foreign currency by licensedbanks on the domestic foreign exchange market in 2012 in-creased by USD 988.1 million or by 17.2 percent, being mainlydetermined by higher sales to resident banks - USD 644.1 mil-lion (by 2.9 times), to the NBM - by USD 252.4 million (by 4.2times) and to non-resident banks - by USD 24.2 million (by 3.5times).

At the same time, the sale of foreign currency to legal entitiesdecreased by USD 61.9 million (1.4 percent) and to individualsby USD 29.8 million (5.6 percent). The sale of foreign currencyby licensed banks on the domestic foreign exchange market in2012 was made mainly to legal entities (66.4 percent), residentbanks (14.5 percent), individuals (7.4 percent) and the NBM(4.9 percent).

The foreign currency surplus on the domestic foreign exchangemarket in the total amount of USD 2829.6 million, mainlyderived from individuals (USD 2697.6 million, or 95.3 percent),purchased by banks in 2012, was sold to legal entities (USD2511.7 million).

Dynamics of banks’ assets and liabilities in foreigncurrency

As of December 31, 2012 the banks’ balance sheet assets inforeign currency19 (loans granted, available funds, requiredreserves, other assets in foreign currency and foreign currency-linked assets) increased by 12.9 percent as compared to De-cember 31, 2011 (from USD 1748.9 million to USD 1974.6million).

Chart 3.36: Evolution of balance sheet as-sets of the licensed banks (million, USD)and of the official exchange rate of nationalcurrency against the U.S. dollar (MDL/USD)

10.0

10.5

11.0

11.5

12.0

12.5

13.0

01/1

2

02/1

2

03/1

2

04/1

2

05/1

2

06/1

2

07/1

2

08/1

2

09/1

2

10/1

2

11/1

2

12/1

2

MDL/USD

1200

1350

1500

1650

1800

1950

2100million USD

Balance sheet assets in foreign currency Exchange rate MDL/USD

Source: NBM

The balance of credits granted in foreign currency held the high-est weight in the total balance sheet assets in foreign currencyand accounted for 62.8 percent as on December 31, 2012, by2.6 percentage points less compared to December 31, 2011.This indicator has varied during 2012 from the minimum level

19excluding the adjustment position of assets in foreign currency


of 64.9 percent to the maximum level of 71.1 percent. Ascompared to December 31, 2011, the balance of loans in foreigncurrency increased by the equivalent of USD 96.5 million (fromUSD 1143.7 million to USD 1240.2 million) or by 8.4 percent.

As by the currency structure, the balance of loans grantedin foreign currency by types of currencies has recorded thefollowing share on December 31, 2012: EUR - 57.7 percent,USD - 42.3 percent. In absolute values, the balance of loans inEUR and USD have increased by the equivalent of USD 84.0million (from USD 631.6 million to USD 715.6 million), orby 13.3 percent and by the equivalent of USD 12.5 millionrespectively (from USD 512.1 million to USD 524.6 million), orby 2.4 percent.

On December 31, 2012 the share of disposable funds in foreigncurrency constituted 19.9 percent in total balance sheet assetsin foreign currency of licensed banks. This indicator has variedduring the year from the minimum level of 16.1 percent tothe maximum level of 22.9 percent. At the end of 2012, thedisposable funds in foreign currency, as compared to December31, 2011, have increased in absolute values by the equivalentof USD 92.7 million (from USD 300.1 million to USD 392.8million) or by 30.9 percent.

Chart 3.37: Dynamics of disposable fundsin foreign currency (equivalent in millionsUSD)

0

50

100

150

200

250

30001

/12

02/1

2

03/1

2

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2

09/1

2

10/1

2

11/1

2

12/1

2

million USD

Cash in foreign currency"Nostro" accounts opened abroadPlacement abroadOvernight placements

Source: NBM

The disposable funds in foreign currency of licensed banks asof December 31, 2012 had the following structure: “Nostro”accounts opened abroad – 49.5 percent, cash in foreign currency– 24.5 percent, overnight placements – 15.8 percent, placementsabroad of the licensed banks - 9.6 percent and securities inforeign currency – 0.6 percent.

During the reporting period, the placements abroad and over-night loans of licensed banks increased by 4.3 and 1.3 percent-age points, respectively.

On December 31, 2012 the balance of disposable funds inforeign currency has recorded the following structure by typesof currency: EUR - 51.2 percent, USD - 39.8 percent, RUB - 7.9percent, other currencies - 1.1 percent. At the end of 2012, theshare of disposable funds in USD decreased by 3.6 percentagepoints on the background of increase in the share of disposablefunds in RUB by 4.4 percentage points.

The balance of required reserves in foreign currency constituted9.6 percent of total balance sheet assets in foreign currency oflicensed banks on December 31, 2012 and during the reportingperiod ranged from the minimum level of 10.0 percent to themaximum level of 11.4 percent.


Balance of foreign currency-linked assets constituted the equiv-alent of USD 103.1 million as of December 31, 2012, increasingslightly by USD 2.0 million or by 2.0 percent as compared toDecember 31, 2011.

The balance of foreign currency-linked loans recorded during2012 the minimum value of USD 101.5 million and the maxi-mum value of USD 108.5 million.

The banks’ balance sheet liabilities in foreign currency recor-ded during the reporting period an increase by the equivalentof USD 242.3 million (from USD 1704.8 million on December31, 2011 to USD 1947.1 million on December 31, 2012), or by14.2 percent, determined mainly by the increase in the balanceof deposits of bank’s clients.

The clients’ term deposits in foreign currency held on December31, 2012 the most significant weight in total balance sheetliabilities in foreign currency (45.5 percent). At the end of 2012,the balance of these deposits increased by the equivalent of USD116.6 million (from USD 769.0 million to USD 885.6 million)by 15.2 percent, mainly at the expense of increased balance ofdeposits of resident individuals.

The term deposits of non-residents increased by 2.8 times as onDecember 31, 2012 (from USD 19.4 million on December 31,2011 to USD 54.1 million on December 31, 2012), mainly dueto non-resident legal entities. During 2012, the share of termdeposits of non-residents in total term deposits of clients rangedbetween 2.6 and 6.2 percent.

At the end of 2012, the share of clients’ various deposits inforeign currency represented 9.6 percent of total balance sheetliabilities in foreign currency, decreasing in absolute values bythe equivalent of USD 217.2 million (from USD 404.1 millionas of December 31, 2011 to USD 186.9 million as of December31, 2012), or by 53.7 percent.

The significant decrease in the various deposits was due to theamendments of regulations related to the structure of liabilitiesin foreign currency since January 2012, namely, the separationof the balances of current accounts from the balances of variousdeposits, which previously formed the same group of accounts.In this context, the share of the balance of current accounts inforeign currency of the clients was 14.0 percent of total balancesheet liabilities in foreign currency, amounting in absolute termsto USD 271.8 million.

The share of various deposits of non-residents in the total clients’various deposits ranged between 3.1 and 10.9 percent, whose


balance was USD 2.7 million at the year-end, being held bynon-resident individuals.

The share of deposits of non-residents in the total balance ofdeposits of clients amounted to 6.1 percent (compared to 3.1percent recorded in 2011), ranging during 2012 between 3.3and 6.1 percent.

The basic balance sheet liabilities in foreign currency of licensedbanks (term deposits, various deposits and current accountsof clients) increased by the equivalent of USD 171.3 million(from USD 1173.1 million on December 31, 2011 to USD 1344.4million on December 31, 2012), or by 14.6 percent.

The share of the balance of deposits in EUR in total clientsdeposits in foreign currency as at the end of the reporting periodwas 66.1 percent, decreasing by 3.6 percentage points comparedto December 31, 2011, the minimum share during the referenceperiod being 65.2 percent and the maximum of 71.6 percent.The balance of clients’ deposits in EUR on December 31, 2012was the equivalent of USD 888.7 million, increasing by theequivalent of USD 70.9 million or by 8.7 percent compared toDecember 31, 2011.

On December 31, 2012 the share of balance of clients’ depositsin USD increased by 3.1 percentage points as compared to theend of 2011 (from 29.4 percent to 32.5 percent). During 2012,the maximum share of these deposits was 34.0 percent, andthe minimum of 27.7 percent. The balance of deposits in USDconstituted USD 436.5 million at the end of the reporting period,increasing by USD 91.9 million, or by 26.7 percent compared toDecember 31, 2011.

Deposits in RUB and other currencies have been an insignificantpart of total clients’ deposits in foreign currency. At the end ofthe analyzed period, the balance of deposits in RUB has con-stituted the equivalent of USD 16.5 million, mainly originatingfrom non-resident legal entities. The share of deposits in RUBin total clients’ deposits increased by 1.2 percent compared with0.5 percent at the end of 2011.

On December 31, 2012 the share of the balance of credits inforeign currency in total balance sheet liabilities in foreigncurrency of licensed banks constituted 24.5 percent, increasingin absolute value by the equivalent of USD 87.0 million (fromUSD 389.8 million to USD 476.8 million), or by 22.3 percent ascompared to the end of 2011.

The balance of term deposits in foreign currency of foreign banksdecreased as of December 31, 2012 by the equivalent of USD


53.0 million (from USD 103.5 million to USD 50.5 million) orby 51.2 percent as compared to the end of 2011.

The balance of conditional assets and liabilities in foreign cur-rency with licensed banks increased significantly at the endof 2012 as compared to the end of 2011. Thus, the balanceof conditional assets has increased by 1.6 times and that ofconditional liabilities by 1.5 times.

On December 31, 2012 the conditional assets in foreign currencyhad the following structure: current purchases – 98.2 percent,purchases on term – 1.0 percent and other conditional assets –0.8 percent. At the same time, the conditional liabilities in for-eign currency had the following structure: current sales – 98.9percent, the sales on term – 1.0 percent and other conditionalliabilities - 0.1 percent. The difference between conditionalassets and liabilities in foreign currency to the regulatory capitalreached the level of minus 1.1 percent as of December 31, 2012.

As compared to the end of December 2011, the open foreigncurrency position20 (long) of the licensed banks for all currenciesdecreased by 9.9 percent (from USD 45.3 million to USD 35.4million). This decrease was determined by the decrease in theUSD position by 40.6 percent (from USD 28.3 million to USD16.8 million), while the EUR position increased by 79.2 percent(from USD 4.8 million to USD 8.6 percent).

Management of foreign exchange reserves

According to the Articles 5, 16 and 53 of the Law on the NationalBank of Moldova no. 548-XIII of July 21, 1995, the NBM holdsand manages the foreign exchange reserves, carries out foreignexchange transactions using foreign exchange reserves assetsand keeps them at an appropriate level to carry out the monetaryand foreign exchange policies. The role of foreign exchangereserves is to ensure the credibility and financial stability ofthe country, to honor the country’s payments related to foreignliabilities of the state and to deal with unforeseen exogenousshocks.

Within the management of foreign exchange reserves process,the NBM provides a high level of safety and a required level ofliquidity of investments. The NBM investment policy is prudent,aiming at optimizing profitability, focusing on liquidity andsafety. An essential element of the management of foreignexchange reserves process is the management of foreign reservesinvestment risk, which is achieved by imposing constraints andlimitations associated with investments.

20including foreign currency-linked assets and liabilities


Table no.A.24 shows the main financial risks related to themanagement of foreign exchange reserves and methods used todiminish them.

The world economy in 2012 has faced numerous turbulences,the European sovereign debt crisis, increased political climateinstability, disagreements over fiscal policy and public debt ceil-ing in the U.S.A and the economic downturn in main emergingeconomies.

In the euro area, numerous rounds of negotiations and summitshave failed to restore normalcy in this region, the poor Europeaneconomic performance having later a negative impact on theglobal economic growth.

Accordingly, during 2012, there were successive downgradesratings of credit given by the rating agencies in several Europeancountries such as France, Austria, Belgium, Italy and Spain,and the establishment of negative prospects of development ofratings of a number of euro area countries. The lending qualityof the foreign exchange reserves has been affected by the lossof the maximum rating AAA of France and Austria, the NBMholding in its portfolio securities issued by the governments andgovernment agencies of the two countries. The NBM’s exposureto the other three countries during 2012 was null.

Chart 3.38: Profitability rates for state secu-rities with maturities of 2 years (%)

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%01

/12

02/1

2

03/1

2

04/1

2

05/1

2

06/1

2

07/1

2

08/1

2

09/1

2

10/1

2

11/1

2

12/1

2

EUR USD GBP CHF JPY

Source: NBM

Chart 3.39: Base rates in USA, EU, GreatBritain, Switzerland, and Japan (%)

0.00%

0.25%

0.50%

0.75%

1.00%

1.25%

01/1

2

02/1

2

03/1

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2

EUR USD GBP CHF JPY

Source: NBM

During 2012, the economic development in the U.S. was in-fluenced primarily by the presidential elections, which werecharacterized by a close fight between the two candidates, eachwith different approaches and visions in terms of stimulatingeconomic growth. This factor led to the economic downturn.

The second influential factor was the economic stimulus pro-gram implemented by the U.S. Federal Reserve System, by ex-panding the bank’s asset portfolio, injecting money into the econ-omy through the purchase of bonds from the market, mainly T-bills and mortgage bonds, which is still ongoing and is aimed atboosting the economic growth and reducing the unemploymentrate.

Great Britain faced economic stagnation, driven largely by thebalance of trade deficit, which led to the establishment by oneof the rating agencies at the end of 2012, of the prospect ofreducing the rating of the country and losing the maximumrating of AAA. The global economic development trend is alsoreflected in the evolution of profitability rates (Chart 3.38). Thebase rates set by the monetary authorities (Chart 3.39) weremaintained at the same level during 2012, excluding the baserate for the EUR, which has been reduced on July 5th from 1.00percent to 0.75 percent.


Official reserve assets rose by 27.97 percent as of December31, 2012 or by USD 549.68 million (from USD 1965.32 millionto USD 2515.00 million) as compared to December 31, 2011.Among the main factors that influenced the growth of officialreserve assets can be listed: grants and loans attracted fromthe IMF, EU and the World Bank, increased required reserves ofthe licensed banks maintained at the NBM, interventions in theinterbank foreign exchange market and income related to themanagement of foreign exchange reserves.

Chart 3.40: Foreign exchange reservesstructure at the end of 2008 - 2012 (million,USD)

12%

48%

16%

17%

7%

9%

50%

11%

25%

6%

1%

37%

15%

36%

11%

12%

22%

24%

24%

18%

10%

32%

17%

23%

17%

0

500

1000

1500

2000

2500

2008

2009

2010

2011

2012

Non-government securitiesGovernment securitiesSupranational securitiesTerm placementsCash and placements on the correspondent account

Source: NBM

Chart 3.41: Normative foreign exchange

USD 45%EUR 35%

GBP 15% CHF 3% JPY 2%

Source: NBM

Chart 3.42: Foreign exchange reserves asof 31.12.2012

USD 52.96%

EUR 34.20%

GBP 12.61%

Other currencies

0.22%

Source: NBM

Within the management of foreign exchange reserves process,the NBM invests in safe instruments used by other central banks:placements on correspondent accounts (usually with other cen-tral banks), term placements in foreign currency and securities,which are classified into supranational securities (issued bysupranational institutions), state securities (issued by the U.S.government, EU member governments, other governmentalissuers with high credit rating) and non-government securities(issued by highly rated agencies).

Some of the foreign exchange reserves are managed externallyby the World Bank. According to the Consulting and Man-agement Investment Agreement, concluded on December 8,2010 between the International Bank for Reconstruction andDevelopment (IBRD) and the National Bank of Moldova, IBRDbecame the consultant and the agent of the NBM for managing apart of the external assets, limited to 20.0 percent of the officialreserve assets (the share of externally managed assets was 8.12percent of the official reserve assets as of December 31, 2012).

Also, according to the Decision of the Council of Administrationof the NBM of December 1, 2011 was created the portfolio ofsecurities held to maturity, which was supplied during 2012 withnew securities. This portfolio allows the NBM to improve its per-formance without significantly affecting the liquidity and safetyof assets, its value being limited to 20.0 percent of the officialreserve assets (the share of assets held to maturity amounted to18.48 percent of official reserve assets on December 31, 2012).

The evolution of foreign exchange reserves during 2008-2012,divided by investment instruments, is shown in Chart 3.40. Adownward tendency of term placements has been recorded,which decreased from 48.33 percent at the end of 2008 to32.26 percent at the end of 2012. Investments in securitiesfollowed a positive trend, their share increasing from 39.42percent in 2008 to 57.49 percent in 2012. During 2012, due tolow rates of remuneration of investments in securities, the shareof term deposits increased approximately by 10.0 percentagepoints from 2011 while the share of investments in securitiesdecreased approximately by 9.0 percentage points.


Return on investment depends on market conditions, fluctua-tions in exchange rates and prices of investment instruments.The evolution of the global economic environment and prospectsof development of financial markets and investment decisionsinfluenced the composition of foreign exchange reserves. InChart 3.42 reflects the share of the currencies in which theforeign exchange reserves are denominated in late 2012. Themost significant share was held by the U.S. dollar – 52.96percent, followed by the euro – 34.20 percent. It should bementioned that, de facto, the composition of foreign exchangereserves may deviate within the limits of +/- 10 percent fromthe normative foreign exchange composition (Chart 3.41).

Despite the unfavorable conjuncture of global economic envi-ronment and the negative developments of profitability rates ofinvestment instruments, the decisions taken in the managementof foreign exchange reserves led to a rate of profitability of1.34 percent for 2012 or USD 29.51 million, compared to 1.29percent or USD 24.66 million recorded in 2011.

3.6 Supervision and regulation of banks’activity

General information

On December 31, 2012 in the Republic of Moldova were op-erating 14 banks licensed by the National Bank of Moldova,including four branches of foreign banks and financial groups.On February 15, 2012, the NBM has withdrawn the license ofC.B. “Universalbank” S.A. to conduct financial activity.

The total number of subdivisions of banks was 1270, of which327 branches, 936 agencies and 7 foreign exchange entities.During 2012 were opened 15 branches, 54 agencies and therewere closed 8 branches, 46 agencies and 1 foreign exchangeentity.

The total number of staff employed in the banking sector as ofDecember 31, 2012 amounted to 11173 employees. On average,each employee in the banking sector accounted for MDL 5.2million assets as of December 31, 2012, increasing by MDL 0.9million (20.9 percent) compared to the end of 2011.

It should be mentioned that the banks have switched to the In-ternational Financial Reporting Standards (IFRS) from January1, 2012.


Assets of banks

In 2012, the banking system in the Republic of Moldova reg-istered the following trends. The assets according to IFRSamounted to MDL 58304.4 million, increasing by MDL 9022.4million compared to the beginning of the year (18.3 percent).Their share in GDP has also increased from 59.8 percent to 66.4percent (Chart 3.44). The asset growth was determined by theincrease of debts by MDL 8414.1 million (21.2 percent) and bythe capital increase (IFRS) by MDL 608.3 million (6.3 percent).

Chart 3.43: Dynamics of assets concentra-tion of the banking system of the Republicof Moldova by groups of banks (%)

83.4%

13.1%

3.5%

63.1%

32.9%

4.0%

0%10%20%30%40%50%60%70%80%90%

100%

02/01/12 31/12/12*

Small banks ( Assets < 1500 mil.MDL)Medium banks (1500 mil.MDL =< Assets < 4500 mil.MDL)Large banks ( Assets >=4500 mil.MDL)

Source: NBM*Data as of 31.12.2012 are not adjusted throughout the textaccording to the external audit results

Chart 3.43 shows the banking sector assets during the reportingperiod.

Chart 3.44: Dynamics of assets, credits anddeposits to GDP (%)

66.462.160.0

50.847.6

41.537.2

66.158.8 59.8

39.438.9

30.926.8

22.2 24.0

37.1 35.5 37.2 39.8

43.243.338.536.5

29.724.9

43.7 40.0 39.8

45.3

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31/1

2/12

Total assets/GDP Total portfolio of loans/GDP

Total deposits/GDP

Source: NBM

Starting with March 31, 2012 the criteria for grouping thebanks have changed. At the end of 2012, the large banks groupincluded 4 banks (C.B. "MOLDOVA-AGROINDBANK" S.A., C.B."VICTORIABANK" S.A., C.B. "Moldindconbank" S.A., Banca deEconomii S.A.), the medium banks group included 7 banks (C.B."EXIMBANK –Gruppo Veneto Banca” S.A., C.B. „MOBIASBANCA– Groupe Societe Generale” S.A., C.B. "BANCA SOCIALA" S.A.,C.B „ProCredit Bank” S.A., C.B. "UNIBANK" S.A., C.B. "ENERG-BANK" S.A., "FinComBank" S.A.) and the group of small banksincluded 3 banks (BCR Chisinau S.A., C.B. "COMERTBANK"S.A., C.B. "EuroCreditBank" S.A.).

Table A.25 shows the structure of banking sector assets by themain components.

In 2012, within the structure of assets have been recorded thefollowing increases (in a descending order):

• loans and claims – by MDL 4765.4 million (15.1 percent);

• cash and cash equivalents21 - by MDL 3365.6 million (30.6percent);

• investments held to maturity – by MDL 436.8 million (14.7percent);

• other assets - by MDL 150.7 million (20.6 percent);

• tangible assets - by MDL 124.8 million (7.9 percent);21Cash and cash equivalents - include cash, interbank loans granted for

a period no longer than 3 months, including funds due from banks, fundsdue from the NBM, funds placed and overnight loans, as well as the corre-sponding accrued interest, state securities issued by the NBM, purchasedwith a maturity of less than 3 months, including uncollateralized securitiesand required reserves in MDL.


• financial assets available for sale – by MDL 99.9 million(42.2 percent);

• financial assets held-for-trading – by MDL 63.5 million(52.2 percent);

• claims on taxes – by MDL 53.0 million (87.9 percent).

At the same time, the following have decreased:

• non-current assets and disposal groups classified as heldfor sale - by MDL 29.3 million (3.9 percent);

• intangible assets – by MDL 6.8 million (2.7 percent);

• financial assets designated as at fair value through profitor loss – by MDL 1.2 million (100.0 percent).

Loans and claims held the largest share in total assets - 62.3percent, by 1.8 percentage points less than at the beginning ofthe year. Cash and cash equivalents amounted to 24.6 percent,increasing by 2.3 percentage points. Investments held to matu-rity held a share of 5.9 percent, down by 0.1 percentage points,and the tangible assets - 2.9 percent, down by 0.3 percentagepoints. Shares of other items in total assets were insignificant.

Gross loan portfolio (according to prudential reports) amountedto MDL 34982.3 million as on December 31, 2012, increasingduring 2012 by MDL 4375.6 million (14.3 percent).

Gross loans ratio to GDP increased from 37.2 percent on January2, 2012 to 39.8 percent on December 31, 2012 (Chart 3.44).

The structure of the loan portfolio of licensed banks in theRepublic of Moldova by industry is presented in Table A.26.

In the context of risk distribution, the loans granted to com-merce held the largest share in total loans - 36.7 percent, fol-lowed by loans granted to food industry - 10.6 percent, loansgranted to productive industry - 8.3 percent, other loans - 7.6percent, loans granted to agriculture - 6.2 percent, consumerloans - 5.8 percent, loans granted to transport, telecommunica-tions and network development - 5.3 percent, loans granted toconstructions sector - 4.4 percent, loans granted to energy indus-try - 4.2 percent, loans granted to the purchase/construction ofbuilding - 4.2 percent, loans granted to individuals performingan activity - 3.6 percent, loans granted to non-bank financialenvironment - 2.4 percent. The loans granted to institutionsfinanced from the state budget held the lowest share - 0.002percent, followed by the loans granted to National House of


Social Insurance/ National House of Health Insurance - 0.02percent, loans granted to territorial-administrative units - 0.1percent, loans granted to banks - 0.2 percent, and loans grantedto non-profit organizations - 0.4 percent.

During 2012, the non-performing loans increased in absolutevalue by MDL 1137.0 million (28.9 percent), amounting toMDL 5072.3 million (Chart 3.45). The share of non-performing(substandard, doubtful, and compromised) loans in total loanswas 14.5 percent as on December 31, 2012, increasing by 1.6percentage points compared to the beginning of the year.

The share of allowance for loan losses in total loans was 10.7

Chart 3.45: Dynamics of the structure ofcredit portfolio and financial leasing of thebanking sector of the Republic of Moldovaaccording to the level of investment opera-tions risk as of 02.01.2012

02.01.2012

7.8%

48.5%

38.7%

2.6%2.4%

Source: NBM

percent as on December 31, 2012, increasing by 1.6 percentagepoints compared to the beginning of the year.

Chart 3.46: Dynamics of the structure ofcredit portfolio and financial leasing of thebanking sector of the Republic of Moldovaaccording to the level of investment opera-tions risk as of 31.12.2012

31.12.2012

6.3%5.0%

3.2%

37.2%48.3%

StandardSupervised

SubstandardDoubtful

Compromised

Source: NBM

It should be mentioned that the allowance calculated for allconditional assets and liabilities in the banking sector amountedto MDL 4719.3 million as on December 31, 2012, while theallowances for impairment losses amounted to MDL 2143.9million, the difference recorded - MDL 2575.4 million.

Banks’ exposures to affiliates recorded significant shares in totalcredits - 2.6 percent (average per sector). The ratio of exposuresto affiliates and Tier I capital amounted to 13.1 percent onDecember 31, 2012 (maximum limit - 20.0 percent of Tier Icapital).

The amount of the ten largest net debt loans constituted 24.4percent of net loans on the sector (maximum limit - 30.0 per-cent of total net loans). The amount of all "large" exposuresconstituted 25.2 percent of the total loan portfolio and 125.5percent of total regulatory capital (the maximum limit - 500.0percent of total regulatory capital).

The total amount of the bank’s net exposures in MDL linkedto foreign exchange rate to individuals, including those whopractice entrepreneurial or other activity, constituted 6.6 per-cent (the limit ≤ 30.0 percent) of total regulatory capital. Theratio of total net exposure, other than mortgages to individuals,accounted for 2.8 percent (the limit ≤ 10.0 percent) of totalregulatory capital.

Loans granted to banks’ employees accounted for MDL 169.8million or 0.5 percent of the total loan portfolio and 2.4 percentof total regulatory capital of the banking sector (maximum limit- 10.0 percent of total regulatory capital).

The ratio of the total investment in long term tangible assets tototal regulatory capital on sector was 23.5 percent (maximumlimit ≤ 50.0 percent).


The ratio of the total investment in long-term tangible assets andequity interest in the capital of economic entities to total regu-latory capital on sector accounted for 26.3 percent (maximumlimit - 100.0 percent).

The share of balance sheet assets in foreign currency combinedwith foreign currency-linked assets in total assets was 40.9percent. The share of balance sheet liabilities in foreign cur-rency and the foreign currency-linked liabilities in total assetsamounted for 40.3 percent. The insignificant difference of 0.6percentage points between the aforementioned shares showsthat the exchange rate risk is minimal and does not significantlyinfluence the financial stability of the banking sector.

Capital of banks

Tier I capital is a part of the total regulatory capital for which theminimum required amount for performing financial activities isestablished in accordance with Article 26 of the Law on FinancialInstitutions no.550-XIII of July 21, 1995.

Tier I capital reached the level of MDL 6924.0 million, decreas-ing by MDL 473.5 million (6.4 percent) as compared to thebeginning of the year.

Chart 3.47: Dynamics of banking capital ofthe Republic of Moldova in 2012 (million,MDL)

2500

3000

3500

4000

4500

5000

5500

6000

6500

7000

7500

TRC 7530.3 7444.1 7274.0 6752.6 6735.4 7020.2

Tier I capital 7483.8 7397.5 7227.1 6654.9 6636.7 6924.0

31.12.2011 02.01.2012 31.03.2012 30.06.2012 30.09.2012 31.12.2012

Source: NBM

Tier I capital decrease was due to the increase in the calculatedbut unformed yet amount of allowances for the impairmentlosses on asset and conditional commitments by MDL 977.2million or by 61.1 percent, which are excluded from the cal-culation of Tier I capital. The allowances for the impairmentlosses on conditional assets and commitments increased due toworsening loan portfolio quality at some banks. On February 15,2012, the NBM withdrew the license of the C.B. "Universalbank”S.A. to perform financial activities.

It should be also mentioned that in accordance with the Reg-ulation on Risk Weighted Capital Adequacy, on December 31,2012 the amount of minimum capital was set at the level ofMDL 200.0 million. In order to comply with the limits setin the Regulation on Risk Weighted Capital Adequacy, threebanks have issued shares in the amount of MDL 148.2 millionat the expense of additional money contributions made by theunderwriters of shares (C.B. "ProCredit Bank" S.A. – MDL 43.2million, C.B.”COMERTBANK” S.A. – MDL 45.0 million, and C.B.„UNIBANK” S.A. - MDL 60.0 million).

As of December 31, 2012 Tier I capital of banks correspondedwith the established minimum required capital (≥ 200.0 mil-lion), with the exception of two banks. Total regulatory capital


includes Tier I and Tier II capital (Tier II capital is limited tomaximum - 100.0 percent of Tier I capital) minus equity interestin the capital of other banks holding the license of the NationalBank of Moldova.

Total regulatory capital compared to the beginning of 2012dropped by MDL 423.9 million (5.7 percent).

Dynamics of Tier I capital and total regulatory capital in theanalyzed period is shown in the Chart 3.47.

The average risk weighted capital adequacy (ratio of total regu-latory capital to risk-weighted assets) is maintained at a highlevel - 24.4 percent (the minimum level in the Republic ofMoldova is ≥ 16.0 percent), indicating a high degree of safetyof banks determined by the existence of a potential of makingrisky operations without affecting the capital. However, one ofthe banks did not comply with this indicator, which represented5.9 percent.

The modification of capital structure of the banking system interms of its concentration on groups of banks is shown in Chart3.48.

The share of Tier I capital of large banks in the total Tier I capitalof the banking system totaled 50.8 percent as of December 31,2012, decreasing by 27.2 percentage points as compared to

Chart 3.48: Concentration of Tier I capitalof the banking sector of the Republic ofMoldova by groups of banks (%)

78.0%

13.6%

8.4%

50.8%

40.1%

9.1%

0%10%20%30%40%50%60%70%80%90%

100%

02/01/12 31/12/12


Source: NBM

January 2, 2012. The share of Tier I capital of medium and smallbanks constituted 40.1 and 9.1 percent respectively, increasingby 26.5 and 0.7 percentage points as compared to the beginningof the year. This has occurred as a result of changes in thecomposition of bank groups.

During the analyzed period, the foreign investors maintainedtheir activity in the banking sector, which is confirmed by thesignificant share of foreign investments in the banks’ capital,which constituted 71.7 percent on December 31, 2012, by 2.3percentage points less than at the end of 2011, as a result ofshare capital increase of banks at the expense of resident share-holders investments, as well as at the expense of the withdrawalof the license of C.B. “Universalbank” S.A. to perform financialactivities on February 15, 2012.

Among the foreign investors participating in the capital forma-tion of banks from the Republic of Moldova are as follows: theEuropean Bank for Reconstruction and Development, banksfrom Italy, France, Romania and Slovenia, as well as corporateinvestors from the United Kingdom, Austria, Germany, USA,Ukraine, Russian Federation, the Netherlands, Greece, CzechRepublic, Switzerland, Cyprus and other countries.


Out of the total number of banks, 4 banks have their capitalformed entirely from foreign investments (2 of them are sub-sidiaries of foreign banks: C.B. “EXIMBANK - Gruppo VenetoBanca” and BCR Chisinau S.A), 1 bank has its capital formedentirely from domestic investments and 9 banks have theircapital formed from foreign and domestic investments.

Liabilities of banks

As of December 31, 2012 the liabilities of banks accounted forMDL 48058.4 million or by MDL 8414.1 million (21.2 percent)more as compared to January 2, 2012. Financial liabilitiesmeasured at amortized cost (clients’ deposits, bonds issued bythe bank, other loans, subordinated debts, overnight loans,securities sold under REPO) held the largest share in totalliabilities as of December 31, 2012 - 98.5 percent (MDL 47343.5million), by MDL 8288.1 million (21.2 percent) more than at

Chart 3.49: Dynamics of liabilities’ concen-tration of the banking system of the Repub-lic of Moldova by group of banks (%)

84.3%

13.0%

2.7%

65.1%

31.6%

3.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

02/01/12 31/12/12


Source: NBM

the beginning of the year.

Thus, the clients’ deposits accounted for MDL 39916.0 million,increasing by MDL 7171.0 million (21.9 percent). The debtson taxes have increased by MDL 168.8 million (92.1 percent),accounting for MDL 352.0 million and the provisions grew byMDL 22.5 million (42.6 percent), accounting for MDL 75.4million (including provision for business restructuring, debtrelated to employee benefits, provisions related to damage costsarising from lawsuits against the bank, funding commitmentsand other provisions). At the same time, other debts (overdrafton “Nostro” accounts, overnight loans from the NBM, overnightloans from banks, loans from banks) decreased by MDL 64.3million (18.3 percent), accounting for MDL 287.6 million andthe financial liabilities held for trading - by MDL 0.9 million(100 percent), accounting for zero (Table A.27).

The clients’ deposits held the largest share in bank liabilities ason December 31, 2012 - 83.1 percent, by 0.5 percentage pointsmore as compared to the beginning of the year.

According to the prudential reports, the balance of depositsamounted to MDL 39772.2 million, increasing by MDL 7059.0million (21.6 percent) compared to January 2, 2012 due tothe increase in individuals deposits by MDL 4770.7 million(23.0 percent), up to MDL 25481.0 million, deposits of legalentities - by MDL 2130.9 million (20.2 percent), up to MDL12684.3 million, and deposits of banks - by MDL 157.4 million(10.9 percent), up to MDL 1607.0 million. Their share in GDPincreased by 5.5 percentage points compared to January 2,2012, accounting for 45.3 percent (Chart 3.44).


As on December 31, 2012, the deposits in foreign currencyheld a share of 43.8 percent (MDL 17435.4 million) in totaldeposits, increasing in absolute value by MDL 2277.7 million(15.0 percent) compared to January 2, 2012. Deposits in MDLrecorded a share of 56.2 percent (MDL 22336.8 million) intotal deposits, increasing by MDL 4781.3 million (27.2 percent)compared to the beginning of the year.

The liabilities’ concentration in the banking system during theanalyzed period is shown in Chart 3.49.

The share of liabilities of large banks in the total banking systemliabilities was 65.1 percent as of December 31, 2012, decreasingby 19.2 percentage points as compared to January 2, 2012.The share of liabilities of medium banks has increased by 18.6percentage points, representing 31.6 percent as on December 31,2012. Simultaneously, the share of liabilities of small banks hasincreased by 0.6 percentage points, accounting for 3.3 percentin total liabilities in the system. These changes occurred becauseof changes in the composition of the bank groups.

Liquidity of banks

The compliance of banks to the liquidity indicators requirementsreveal the existence of financing sources for covering short andlong term potential needs.

Chart 3.50: Dynamics of liquid assets (mil-lion, MDL) and thier share in total assets(%) of the banking sector of the Republic ofMoldova

33.2% 31.4%31.8%

32.3% 31.6%

32.9%

0

5000

10000

15000

20000

25000

Cash and precious metals 1990.7 2010.0 2351.8 2402.7 2437.0 2470.9

Deposits at NBM 5136.2 5173.7 4502.1 4997.8 5171.3 5971.3

Liquid securities 6300.0 5927.5 6958.4 6669.5 7423.2 7370.6

Net credits and interbank loans 2412.0 2442.9 2356.7 3241.4 2613.1 3351.8

Total liquid assets 15838.9 15554.1 16169.0 17311.4 17644.6 19164.6

31.12.2011 02.01.2012 31.03.2012 30.06.2012 30.09.2012 31.12.2012

LA / A

Source: NBM

Thus, the long-term liquidity (assets with the reimbursementterm over 2 years / financial resources with the potential with-drawal term of over 2 years ≤1) accounted for 0.7 as of Decem-ber 31, 2012.

The current liquidity (liquid assets expressed in cash, depositswith the NBM, state securities, and net interbank credits withthe term of up to 1 month / total assets X100% ≥ 20.0 per-cent) equaled to 32.9 percent at the end of 2012. Both of theindicators are observed by all banks.

Liquid assets totaled MDL 19164.6 million, and increased byMDL 3610.4 million as compared to January 2, 2012 (23.2 per-cent). Within the structure of liquid assets, the liquid securitiesincreased by MDL 1443.1 million (24.3 percent), net interbankloans up to 1 month - by MDL 908.9 million (37.2 percent),deposits with the National Bank of Moldova - by MDL 797.7million (15.4 percent) and cash and precious metals – by MDL460.9 million (22.9 percent) (Chart 3.50).


The values of liquidity indicators reveal the existence of ade-quate sources to support the payments related to liabilities anddetermine a low level of vulnerability of banks.

The liquid securities held the largest share in liquid assets as ofDecember 31, 2012 – 38.5 percent, followed by deposits withthe NBM – 31.2 percent, current net interbank placements –17.5 percent, and cash and precious metals – 12.9 percent.

Income and expenses of banks

As of December 31, 2012 the profit on the banking sector forthe financial year amounted to MDL 572.6 million. Comparedwith 2011, the profit fell by MDL 233.1 million (28.9 percent).The worsening situation was caused by higher interest andnoninterest-related expenses and by lower noninterest-relatedincome.

The dynamics of income and expenses of banks during theanalyzed period is shown in Chart 3.51.

Thus, the interest-related income amounted to MDL 4393.2 onDecember 31, 2012 or 72.0 percent of total income, increasingby MDL 343.3 million or 8.5 percent compared to December 31,2011. The interest-related income on loans and receivables heldthe largest share within the structure of interest-related income,which accounted for MDL 3947.7 million or 89.9 percent ofthe total, increasing by MDL 571.4 million or by 16.9 percent

Chart 3.51: Dynamics of banking incomeand expenses in the Republic of Moldovaduring 2011-2012 (million, MDL)

0

1000

2000

3000

4000

5000

6000

7000

Interest-related incomes 4049.9 4393.2

Interest-related expenditures 1751.2 2211.0

Non-interest incomes 1732.4 1710.0

Non-interest expenditures* 3225.4 3319.7

Total incomes 5782.3 6103.3

Total expenditures 4976.6 5530.7

31/12/11 31/12/12

Source: NBM*The non-interest related expenses for 2011 include deductionsfor allowances for non-interest related assets loss anddeductions for provisions for conditional commitments losseswhile the non-interest related expenses for 2012 include theimpairment of financial assets not at fair value through profit orloss and the impairment of non-financial assets.

compared to December 31, 2011.

Noninterest-related income accounted for MDL 1710.0 millionor 28.0 percent of total income, decreasing by MDL 22.4 mil-lion (1.3 percent) compared to December 31, 2011. Fees andcommissions related income held the largest share in totalnoninterest-related income, amounting to MDL 1011.9 million(59.2 percent).

The total amount of expenses equaled to MDL 5530.7 million,of which MDL 2211.0 million or 40.0 percent were held byinterest-related expenses (up by MDL 459.8 million or by 26.3percent compared to December 31, 2011).

Noninterest-related expenses (including impairment of financialassets not at fair value through profit or loss and the impairmentof non-financial assets) accounted for MDL 3319.7 million or60.0 percent of total expenses (increasing by MDL 94.4 millionor by 2.9 percent compared to December 31, 2011).


As of December 31, 2012 the impairment of financial assetsnot at fair value through profit or loss amounted to MDL 605.8million, and the deductions for allowances losses on assetsaccounted for MDL 971.8 million as of December 31, 2011.

The return on assets22 and return on equity23 of licensed banksin 2012 were of 1.1 percent and 5.6 percent, respectively, downby 0.7 and 5.0 percentage points as compared to the end of theprevious year.

The net interest margin24 was of 5.1 percent as on December31, 2012, decreasing by 1.3 percentage points versus the end of2011.

Chart 3.52: Dynamics of the net interestmargin, the return on assets and return onequity in the banking system of the Republicof Moldova (%)

1.8 2.9 2.0 2.0 1.1

10.6

14.6

10.2 10.5

5.66.4 5.7 5.3 5.2

5.1

0

2

4

6

8

10

12

14

31/12/11 31/03/12 30/06/12 30/09/12 31/12/12

Return on assets Return on shareholders equityNet interest margin

Source: NBM

The absolute value of interest-bearing assets increased by MDL7322.9 million during 2012 or by 18.3 percent, totaling MDL47426.8 million on December 31, 2012. Their share in totalassets has increased by 0.1 percentage points compared to thebeginning of 2012, accounting for 81.3 percent on December31, 2012. This significant share in total banking assets indicatesthe ability of banks to generate income in the future.

3.7 Payment system

In order to ensure the financial stability and to maintain pub-lic confidence in payment instruments, the National Bank ofMoldova has the statutory task of supervising the paymentsystem in the Republic of Moldova and to facilitate the efficientfunctioning of the interbank payment system. This task isestablished by Art.5 letter f) of the Law no.548-XIII of July21, 1995 on the National Bank of Moldova.

To fulfill this task, the National Bank of Moldova supervisesthe national payment system in accordance with the PaymentSystem Oversight Policy in the Republic of Moldova (approved bythe Decision of the Council of Administration no.143 of June30, 2011) and the applicable normative acts. The National Bankis also the administrator of the Automated Interbank PaymentSystem (AIPS), which is formed of Real-Time Gross SettlementSystem (RTGS) and Designated-time Net Settlement System(DNSS). The RTGS is designed for processing large-value andurgent payments, and the DNSS is designed for processing retailpayments.

22Return on assets = annualized net income / average assets23Return on equity = annualized net income / average equity24Net interest margin = annualized net interest / average interest-bearing

assets


Developments in the payment systems

As regarding to the automated interbank payment system, thevolume of payments processed in 2012 decreased by 1.3 percentcompared to 2011 and exceeded 12.9 million payments andtheir value amounted to MDL 586.7 billion.

It should be mentioned that, within the payments structure, thebudgetary credit transfers held the largest share (56.8 percentof total payments), followed by regular transfers of clients (42.4percent). In terms of value, the payment structure was different,the value of regular transfers of clients (22.4 percent) exceededthe budgetary credit transfers (16.7 percent), but the transfersof banks in their own name and those of the NBM held thelargest share (60.6 percent of total payments).

The distribution of the number of payments between the AIPScomponents in 2012 represented: RTGS – 8.0 percent of pay-ments and DNSS – 92.0 percent. The ratio of the two AIPScomponents is changing in terms of the value of payments,the RTGS processed 93.0 percent of total amount of paymentswhile the DNSS – only 7.0 percent. This is explained by thedestination of the two systems: the RTGS is processing highvalue and urgent payments, while the DNSS is processing thelow value payments.

The number of bankcards in circulation in 2012 has increased by11.0 percent as compared to the previous year, which exceededthe threshold of 1.01 million cards.

The value of transactions with cards issued by the licensedbanks from the Republic of Moldova exceeded MDL 20.0 billion,increasing by 21.8 percent compared with 2011. The bankcardsissued in the Republic of Moldova are mainly used for cashwithdrawals - 87.0 percent of the total number and 95.7 percentof the total amount of transactions made with cards in theRepublic of Moldova.

In the foreign banks network, the cards issued by the banksfrom the Republic of Moldova were primarily used for cashlesspayments (85.5 percent of total number and 73.8 percent of thetotal amount of transactions carried out abroad).

Holders of bankcards issued abroad during 2012 have carriedout over 1.5 million transactions in the network of banks in theRepublic of Moldova in the amount of MDL 2.4 billion (up by52.1 percent of the number and 35.5 percent of the amount oftransaction).

The positive trends on the bankcards market in the Republic ofMoldova during 2012 were:


• increased number of virtual cards ( + 31.0 percent com-pared to 2011);

• expansion of the network of bankcard acceptance by mer-chants (+ 19.0 percent compared to 2011);

• increased number of hybrid cards25 (+ 55.0 percent com-pared to 2011).

Payment system oversight

According to the Payment System Oversight Policy in the Republicof Moldova, (approved by the Decision of the Council of Ad-ministration no.143 of June 30, 2011), the oversight purposeis to ensure a stable and efficient functioning of payment andsettlement systems, and to ensure the effectiveness and safetyof cashless payment instruments and remote banking systems.

The National Bank of Moldova oversees the payment and set-tlement systems, their stable and efficient functioning beingessential for financial stability and monetary and foreign ex-change policy implementation (automated interbank paymentsystem, securities book-entry system of the NBM), as well as themechanisms for risk management established within the systemswidely used by the population for payments and transfers (bankcard payment systems, international money transfers systems).

Likewise, in order to promote public confidence in cashlesspayments, the National Bank oversees the cashless paymentinstruments and remote banking systems to ensure their effec-tiveness and safety.

In order to achieve the objectives of (Payment System OversightPolicy in the Republic of Moldova, during 2012 the NationalBank has evaluated and monitored the payment and settlementsystems, cashless payment services and instruments and hasdeveloped and improved the applicable oversight framework.

Thus, during 2012 the National Bank has evaluated the auto-mated interbank payment system through the Basel principlesfor systemically important payment systems (Core Principles forSystemically Important Payment Systems, BIS-CPSS )

The process of finalizing the nstruction on reporting of infor-mation related to the use of payment instruments and services26,was completed, which provides the method of reporting theinformation regarding the use of credit cards/cards details, the

25cards equipped with a microprocessor and a magnetic tape26According to this Instruction, the first reporting shall be made for the

second quarter of 2013.


credit transfers, direct debits, remote banking systems and theuse of international money transfer services by individuals. Theentry into force of this Instruction will facilitate the conduct ofthe oversight function and will enable the monitoring of thedevelopments in the use of payment instruments and services.

In order to facilitate the dialogue between the payment servicemarket participants, to ensure the achievement of the objectivesset out in the Payment System Oversight Policy in the Republicof Moldova, the National Bank initiated a dialogue with therelevant institutions as to create a National Council of Payments.The Council is to be composed of representatives of public andprivate sectors and will be an effective forum for interactionbetween all key players in the payment services market.

3.8 Information system for reporting to theNational Bank of Moldova

As a result of a project carried out in coordination with aninternational consortium, in early 2012, a new system for re-porting to the NBM was successfully created and implemented(SIRBNM), which is based on the international standard fordata transmission - XBRL.

It should be mentioned that with the gradual transition to report-ing through SIRBNM, the approach of the data required to bereported has been also remodeled, by applying the model basedon primary data, compared with the model based on tables.In this regard, the request for structured primary data ensurestheir optimal processing for analysis and development of outputreports, streamlining the process and reallocating the time foranalyzing the quality of data and for their processing. One of thefundamental principles underlying the implementation of thismodel is the maximum insurance of reusing the primary data,which aims to reduce the reporting burden of entities relatedto the submission of primary data to the NBM. Additionally,to ensure a high level of data quality, the unified referenceinformation (nomenclature) is used and there is the possibilityof validating the data reported before submitting them to theNBM (as of December 31, 2012 - about 2000 validation rules).

There are 3 reporting domains within SIRBNM:

• FINREP domain;

• COREP domain;


• ORD domain – includes all statistical and prudential re-ports requested by the NBM from the reporting entitiesthat are not part of FINREP and COREP reporting frame-work.

The first reports received through SIRBNM were those related tothe FINREP reporting framework. Subsequently, in the contextof the gradual transition to the new reporting system, somestatistical and prudential reports of the ORD were reviewed. Itshould be mentioned that the system is also capable of receivingreports related to the COREP reporting framework. In 2012,the second phase of development of the reporting system hasbeen launched, within which the functionality needed to en-hance statistical and prudential reporting in XBRL format willbe developed.

The objectives of this project are aimed to optimize the reportingprocess and the information flow to the NBM, to improve thequality of the reported data, including their relevance, integrity,timeliness, accuracy, accessibility, comparability and consistency,to reduce costs and efforts needed to ensure compliance byreporting entities, to optimize the data analysis process, thereporting regulatory framework of licensed banks of the Re-public of Moldova and, not least, to align the reporting to therequirements applied in the European Union. Thus, it is to beachieved the preconditions for the full transition of licensedbanks to the reporting process through SIRBNM, including theuse of the transportation component of this system.

It should be also mentioned that the new reporting system(SIRBNM) was awarded at a prestigious competitions at Euro-pean level - European IT & Software Excellence Awards 2013 inLondon, in the category Vertical Market Solution of the Year.

3.9 Information technology

During 2012, following the objectives of the Strategy of in-formation technology (IT) development for 2011-2015 of theNBM, the Department of Information Technology (DIT) hasbeen involved in major projects with a significant impact on thestrategic development of the NBM. Here below will be reviewedthe most important projects and achievements of the DIT during2012.

As regarding the aspects of hardware and IT services infrastruc-ture, the greatest effort has been directed towards strengthening


of virtualization capacity of the IT resources. The purpose ofthe virtualization of the IT resources projects in the NBM is toensure, on one hand, a more efficient management of existingresources, and, on the other hand, to optimize the processesrelated to the way they are allocated, managed, monitoredand disused, as well as related to the capacity and changemanagement, information security etc. One of the projectsbased on this direction of development, initiated during 2012and to be completed by 2014, is the implementation of VirtualDesktop Infrastructure. This project is based on an innovativeconcept for the Republic of Moldova, which allows obtainingultimately many significant benefits such as more a efficientuse and management of IT resources, increased level of dataprotection, ensuring a high level of availability of the workingplace, enhancing responsiveness and minimizing the recoverytime in case of incidents of continuity, increased user mobilityetc.

As regarding the IT applications and systems, there were initi-ated and implemented several major projects in parallel. Oneof these projects aims to transform the operational businessprocesses of the NBM and to modernize its information systemswhich will underpin these processes (Core banking and ERP).The main objective of the project is to provide evaluation andtransformation of business processes related to the NBM’s finan-cial, material and human resources management, as well as tomodernize the banking information system of the NBM so asto achieve the objective of increasing operational efficiency ofthe NBM. The aim of the Transform NBM project focuses on amultidimensional transformation of the organization with thepurpose to ensure a maximum alignment with the strategicobjectives. This approach is based on the model of large-scale architectural organization (Enterprise Architecture), whichensures after the implementation the compliance of businessprocesses, organizational structure, personnel, systems, infor-mation, technology etc. with the objectives of the organization.

The implementation of a single platform for monetary andforeign exchange instruments trading is another importantproject initiated during the reporting year. The primary purposeof this project is to ensure a sustainable development of themonetary and foreign exchange market through the consolida-tion of trading processes on a single platform, by upgradingthe technologies and processes, ensuring greater effectiveness,efficiency and transparency, and through the consolidation ofthe risk management capacity.

Other important projects to be mentioned in this context are:

• the reporting information system (SIRBNM) has beenput into commission and the financial reporting process


(FINREP) in the XBRL format has been launched. Thesecond stage of developing the reporting system has alsobeen launched, where will be developed the functional-ity necessary to strengthen the statistical and prudentialreporting in the XBRL format;

• the project of modernization and improvement of thestructure, content and design of the official website of theNBM has been launched, which is one of the measureslaunched by the NBM to achieve its strategic objective toimprove the external communication. The official websiteof the National Bank of Moldova is intended to providepublic access to accurate and operative information on theNBM activity and on the situation of the banking system ofthe Republic of Moldova and is considered to be one of thebasic tools that provide communication with stakeholders,contributing to the formation of the NBM image. Basedon this, the project aims to conduct a comprehensivereview of the structure and information content, the webdesign, interactive elements, which together create thenecessary conditions for effective communication withexternal parties of the NBM;

• the service for payment messages processing and pay-ments monitoring within SWIFT has been implemented,which is a solution for data analysis and reports generationbased on data received through SwiftFinInform serviceon behalf of reporting entities, with regard to the inter-national payments made through the Swift network, inorder to significantly improve the oversight capabilities ofthe NBM.

In order to increase the security of information, the DIT initiateda project to implement an instrument with a complex function-ality, Data Loss Prevention type, which comes to proactivelyensure a more complex control on the method the sensitive dataprotection is achieved within the NBM.

3.10 Cash operations

At the end of 2012, cash in circulation amounted to MDL 14557million or by 21.0 percent more as compared to MDL 12019million recorded in 2011.

Chart 3.53: Evolution of banknotes in circu-lation (in terms of value)

0

800

1600

2400

3200

4000

4800

5600

6400

1 lei 5 lei 10 lei 20 lei 50 lei 100 lei 200 lei 500 lei 1000lei

MDL, million

2010 2011 2012

Source: NBM

Banknotes and coins in circulation

Banknotes in circulation at the end of 2012, in terms of value,amounted to MDL 14471 million, by 21.2 percent more than inthe same period of 2011.


Cash in banknotes in circulation at the end of 2012, in terms ofquantity, according to the face value structure, was 225 millionbanknotes, by 17.0 percent more than in 2011.

The quantitative increase of banknotes in circulation was dueto increased share of banknotes with the face value of MDL 10,MDL 20, MDL 50, MDL 100 and MDL 200 of the total banknotesin circulation.

Chart 3.54: Evolution of banknotes in circu-lation (in terms of quantity)

0

10

20

30

40

50

60

70

1 lei 5 lei 10 lei 20 lei 50 lei 100lei

200lei

500lei

1000lei

MDL, million

2010 2011 2012

Source: NBM

Structurally, the banknotes at the end of period constituted, interms of quantity, as follows: MDL 1 - 68.8 million banknotes,MDL 5 - 13.3 million banknotes, MDL 10 - 28.1 million ban-knotes, MDL 20 - 16 million banknotes, MDL 50 - 30.4 millionbanknotes, MDL 100 - 33.4 million banknotes, MDL 200 - 30million banknotes, MDL 50 - 4.6 million banknotes and MDL1000 - 0.6 million banknotes.

Chart 3.55: Structure of banknotes in circu-lation by face value at the end of 2012 (interms of quantity)

30.55%

5.90%

12.46% 7.10% 13.51%

14.86%

13.33%2.04%0.25%

1 lei

5 lei

10 lei

20 lei

50 lei

100 lei

200 lei

500 lei

1000 lei

Source: NBM

Chart 3.56: Structure of banknotes in circu-lation by face value at the end of 2012 (interms of value)

1.94%0.48%

0.46%

2.21%

10.52%

23.13% 41.49%

15.90%

3.87%

Source: NBM

Charts 3.55 and 3.56 show a detailed structure of banknotes incirculation by face value, reflected both as quantity and value.

Divisional coins in circulation at the end of 2012, in terms ofvalue, amounted to MDL 82.2 million, by 8.9 percent higherthan the same period of 2011.

Cash in divisional coins in circulation at the end of 2012, interms of quantity, according to the structure of the face value,accounted for 583.8 million coins, by 8.4 percent more than inlate 2011.

The quantitative increase in the divisional coins in circulationwas due to the increased share of divisional coins in circulationwith the face value of 5 bani, 10 bani and 25 bani in total coinsin circulation. As regarding the face value structure, at the endof period, the coins, in terms of quantity, accounted for 5 bani -28.6 percent, 10 bani – 29.0 percent, and 25 bani – 24.2 percent,while in terms of value these accounted for 10.1 percent, 20.6percent and 42.9 percent respectively.

Cash issuance, withdrawal and processing

During 2012, the NBM issued cash in the total amount of MDL4408 million, by 24.3 percent more compared to 2011.

The banknotes issued in 2012, which in terms of value amountedto MDL 4401.3 million, by 24.1 percent more than in the sameperiod of 2011, while in terms of quantity amounted to 76.4million banknotes, by 17.5 percent more than in 2011.

The increased quantity of banknotes issued in circulation wasdue to the increased share of banknotes of MDL 1, MDL 10,


MDL 20, MDL 50, MDL 100 and MDL 200 in total banknotesissued in 2012.

According to the face value structure, the banknotes issuedin 2012, in terms of quantity, were as follows: MDL 1 - 11.1million banknotes, MDL 5 - 4.8 million banknotes, MDL 10- 15.3 million banknotes, MDL 20 - 10.4 million banknotes,MDL 50 - 14.7 million banknotes, MDL 100 - 10.1 millionbanknotes, MDL 200 - 9.3 million banknotes, MDL 500 - 0.7million banknotes, MDL 1000 - 0.03 million banknotes.

Chart 3.57: Evolution of coins in circulation(in terms of quantity)

20

50

80

110

140

170

200

1 ban 5 bani 10 bani 25 bani 50 bani

coins, million

2010 2011 2012

Source: NBM

Chart 3.58: Evolution of coins in circulation(in terms of value)

0

5

10

15

20

25

30

35

40

1 ban 5 bani 10 bani 25 bani 50 bani

MDL, million

2010 2011 2012

Source: NBM

Chart 3.59: Banknotes issued in 2012 (interms of quantity)

14.45%6.35%

20.00%

13.57%19.30%

13.12%

12.20%

0.97%0.04%

1 leu

5 lei

10 lei

20 lei

50 lei

100 lei

200 lei

500 lei

1000 lei

Source: NBM

Chart 3.59 shows in detail the quantitative structure of issuedbanknotes by their face value.

Coins issued in 2012, in terms of value, amounted to MDL6.6 million, by about 0.75 percent less than the coins issuedin the same period of 2011, and in terms of quantity - 45.4million coins, by about 16.4 percent more than in 2011. Thequantitative increase of coins issued into circulation is due tothe coins with face values of 5 bani, 10 bani and 25 bani, whichaccounted for 48.21 percent, 11.3 percent and 34.4 percentrespectively.

According to face value structure, the coins issued in 2012, interms of quantity, were as follows: 1 ban - 1.8 million coins, 5bani - 10 million coins, 10 bani - 15.8 million coins, 25 bani- 17.6 million coins, and 50 bani - 0.26 million coins. Chart3.60 shows in detail the quantitative structure of issued coinsby their face value.

In 2012, the NBM withdrew from circulation, through licensedbanks, banknotes in the amount of MDL 1.874 million, by 30.4percent less than in the same period of 2011. In terms of theirquantity, there have been withdrawn 42.8 million banknotes, by30.0 percent less than in 2011.

Charts 3.61 and 3.62 show in detail the structure of banknoteswithdrawn from circulation during 2012 and 2011.

In order to preserve the quality and integrity of banknotes incirculation, the National Bank of Moldova processed 105 millionbanknotes in 2012, verifying both their authenticity and quality.As a result, about 43 million banknotes were identified as unfitfor circulation. The attrition rate was of 2.3 percent, slightlyhigher than the share recorded in 2011.

National currency counterfeiting

In 2012, the number of counterfeited banknotes in nationalcurrency identified by the experts accounted for 3231 banknotes.


Although this number increased by 2 times compared to 2011,the share of counterfeited banknotes in total genuine banknotesin circulation at the end of the reporting period (which totaled225 million banknotes) remains very low and represents 0.0014percent.

Chart 3.60: Coins issued in 2012 (in termsof quantity)

3.96%21.93%

34.79%

38.75%0.57%

1 ban

5 bani

10 bani

25 bani

50 bani

Source: NBM

Chart 3.61: Banknotes withdrawn from cir-culation in 2012 (in terms of quantity)

17.40%6.93%

22.20% 13.04% 21.09%

13.33%

5.33%0.60%0.07%

1 leu

5 lei

10 lei

20 lei

50 lei

100 lei

200 lei

500 lei

1000 lei

Source: NBM

Chart 3.62: Banknotes withdrawn from cir-culation in 2011 (in terms of quantity)

0.07% 0.51%4.18%

15.83%

21.22%13.19%22.20%

7.90%14.91%

Source: NBM

Counterfeiters showed predilection for the banknotes with theface value of MDL 100, totaling 2552 banknotes, MDL 50 - 392banknotes, MDL 1000 - 113 banknotes of the total amount ofcounterfeits found in 2012.

As for comparison, the number of counterfeit banknotes foundin 2011 totaled 1168 pieces. The highest number of counterfeitbanknotes was recorded for the banknotes with the face valueof MDL 100 – 579 banknotes, MDL 200 - 164 banknotes, MDL50 - 132 banknotes, MDL 500 - 105 banknotes.

Charts 3.63 and 3.64 show in detail the structure of counter-feited banknotes by their face value.

In order to combat counterfeiting of the national currency, theNational Bank of Moldova recommends further to be alert to thepossibility of fraud, to verify the authenticity of banknotes andcoins, and in case of identifying counterfeits to withdraw themfrom circulation and to notify the Ministry of Internal Affairs.

At the same time, the NBM through cooperation with the Min-istry of Internal Affairs provides the licensed banks with spe-cialized courses on methods of finding and withdrawing fromcirculation of counterfeits.


Commemorative coins issuance

Pursuant to the Law no.548 – XIII of July 21, 1995 on theNational Bank of Moldova, the Decision of the Council of

Chart 3.63: Structure of counterfeited ban-knotes by their face value identified in 2012(in terms of quantity)

0.00%

0.09%

0.50%

2.54%

12.13%

78.98%

1.92%0.34%

3.50%

1 lei

5 lei

10 lei

20 lei

50 lei

100 lei

200 lei

500 lei

1000 lei

Source: NBM

Chart 3.64: Structure of counterfeited ban-knotes by their face value identified in 2011(in terms of quantity)

0.00%

1.28%

1.11%

6.68%

11.30%

49.57%

14.04%

8.99%7.02%

Source: NBM

Administration of the National Bank of Moldova no.35 of Febru-ary 16, 2012 on the issuance of commemorative coins, theDecision of the Government of the Republic of Moldova no.153of March 12, 2012 on the issuance of commemorative coins, theNational Bank of Moldova issued 13 commemorative coins in2012, with various themes, including 2 gold and 11 silver coins.The mintages were different, according to the metal of whichthey were minted, in total being issued 2000 gold coins and16500 silver coins.

Table A.28 shows in detail the commemorative coins issued in2012.

3.11 International Cooperation of the Re-public of Moldova

International Monetary Fund (IMF)

As a member of the IMF, the Republic of Moldova, representedby the Governor of the National Bank of Moldova (as theGovernor in the Council of Governors of the IMF) and theFirst Deputy Governor of the National Bank of Moldova (asthe Alternate Governor of the Board of Governors of the IMF),participated in the Spring Meetings of the IMF and World Bankheld in Washington, USA, during April 20 – 22, 2012, and inthe Annual Meetings of the IMF and World Bank, which tookplace in Tokyo, Japan, during October 9 – 14, 2012. At thesemeetings, they discussed issues of global concern such as globaleconomic trends, poverty eradication, optimizing financial andtechnical assistance, the development of the global financialsystem etc.

The year 2012 was marked by the continuation of reformsinitiated by the IMF under the Fourteenth General Review ofQuotas and Reform of the Executive Board. In this context, theNational Bank of Moldova has developed two draft laws, whichwere subsequently approved by the Parliament, by which theRepublic of Moldova supports the IMF reforms: Law no.109of May 11, 2012 on increasing the amount of the subscriptionof the Republic of Moldova to the International Monetary Fund,Law no.118 of May 24, 2012 on accepting the Amendment on theReform of the Executive Board.


As on December 31, 2012 the quota of the Republic of Moldovato the IMF constituted SDRs 123.2 million or approximately USD189.7 million, which represented 0.05 percent of the IMF capital.After the entry into force of the reforms under the FourteenthGeneral Review of Quotas and Reform of the Executive Board,the Republic of Moldova will increase its IMF quota subscriptionfrom the current level of SDRs 123.2 million to SDRs 172.5million.

In the context of the above-mentioned reforms, Belgium andLuxembourg have joined the Netherlands Constituency as onNovember 1, 2012. Thus, this Constituency (of which the Repub-lic of Moldova is a part) includes 15 countries: the Netherlands,Belgium, Ukraine, Israel, Romania, Bulgaria, Luxembourg, Croa-tia, Bosnia-Herzegovina, Cyprus, Georgia, Moldova, Armenia,Macedonia and Montenegro (listed in order of their quotasand voting power) and holds the second voting power (afterthe U.S.) in the IMF. The new Constituency was made to opti-mize the number of executive directors representing advancedEuropean countries in favor of emerging and developing ones.

During 2012, the relations of the National Bank of Moldova withthe IMF continued to develop in the context of IMF evaluationmissions on the performance of achieving the commitmentsundertaken under the reform program supported by the IMFthrough the Extended Fund Facility (EFF) and the ExtendedCredit Facility (ECF).

In this context, during May 3 - 17, 2012 and subsequently,during November 7 – 21, 2012, a mission of the EuropeanDepartment of the IMF has conducted visits to the Republic ofMoldova in the context of regular consultations under ArticleIV of the IMF Statute and the 5th and 6th evaluations of theimplementation of the program supported by the IMF.

The mission reviewed the developments in Moldova’s econo-my, evaluated the macroeconomic prospects and discussed themacroeconomic policies. As a result of these discussions, theIMF said that although the economic growth of the Republic ofMoldova stalled in 2012, the NBM policy was appropriate inthe context of low inflation and anemic economic activity. Atthe same, for technical reasons, the Moldovan authorities haveasked the IMF for a period of several months over the deadlinefor concluding the 6th review (scheduled for December 31,2012) in order to implement a number of structural reforms.

During 2012, the National Bank of Moldova has received fromthe IMF the amount of SDRs 100.00 million (USD 154.64 mil-lion), offered through the two funding mechanisms - EFF andECF to strengthen the international reserves of the Republic of


Moldova. Out of this amount, SDRs 69.12 million (USD 106.61million) represent disbursements under the EFF and SDR 30.88million (USD 48.03 million) - disbursements under the ECF(Table A.29).

In 2012, total payments for loans servicing, granted by the IMFto the NBM, accounted for SDRs 11.73 million (equivalent ofUSD 18.27 million), out of which SDRs 10.53 million (equiva-lent of USD 16.13 million) constituted the principal amount ofthe loan payments and SDRs 1.20 million (equivalent of USD1.85 million) constituted the payments for interest and fees onloans.

European Union (EU)

In 2012, the relations between the Republic of Moldova andthe EU have been conducted mainly in the context of carryingout the process of negotiating on the Moldova - EU AssociationAgreement, launched on January 12, 2010. This document isto accelerate the political association, the deepening of sectorcooperation and the progressive economic integration of theRepublic of Moldova into the EU.

One of the main objectives of the future Association Agreementis the establishment of the Deep and Comprehensive Free TradeAgreement between the Republic of Moldova and the EuropeanUnion (DCFTA). This free trade area involves the gradual lib-eralization of trade in goods and services (including financialservices), free movement of labor, reduction of customs dutiesand non-technical barriers, abolition of quantitative restrictionsand harmonization of the Republic of Moldova’s legislation withthat of the European Union.

In the context of the Action Plan of the Republic of Moldovaon the implementation of the European Commission recom-mendations for the application of DCFTA between the Republicof Moldova and the EU (approved by the Decision no.1125of December 14, 2010 of the Government of the Republic ofMoldova), the NBM continued to prepare reports on progressmade in meeting the measures set in the above-mentionedaction plan.

On March 20 - 22, 2012, as part of the 10th round of negotia-tions for signing the Association Agreement, the negotiationson the establishment of the DCFTA have started. In 2012 havebeen conducted four rounds of negotiations for DCFTA. TheNBM participated in the discussions on “Trade in services, estab-lishment and electronic commerce” and “Current payments andcapital flows” in the draft agreement for establishing the DCFTA.During the negotiations with the representatives of the National


Bank of Moldova, a number of commitments on services in thebanking and other financial services and issues related to capitalmovements were discussed. Specific commitments assumedunder these sections are to be included in the future Moldova -EU Association Agreement.

In the context of cooperation between the Republic of Moldovaand the EU, the NBM representatives attended in 2012 themeetings of the subcommittees of cooperation between theRepublic of Moldova and the EU - “Economics, Finance, Statis-tics” and “Trade and Investment” - which are sectoral workmeetings at expert level that are held periodically. Within thesemeetings, a range of topics related to cooperation between theRepublic of Moldova and the EU have been discussed, as well asthe development of macroeconomic indicators and the reformsundertaken by the National Bank of Moldova in the domesticbanking sector, future projects designed to further strengthenthe banking sector of the country.

During 2012, the Republic of Moldova has continued to benefitfrom EU financial assistance in various fields.

In April 2012, the Republic of Moldova received the third andthe last tranche of EUR 30.0 million from the grant given by thesignature on December 16, 2010 in Brussels of the Memorandumof Understanding between Moldova and the European Union onMacro-financial Assistance in the form of grant amounting to EUR90.0 million. The first two tranches of EUR 40.0 million andEUR 20.0 million were granted to the Republic of Moldova inDecember 2010 and September 2011 respectively. It should bementioned that the disbursement of these tranches was due tocommitments undertaken by the Republic of Moldova in theaforementioned memorandum, including those related to theNBM competencies. In this regard, during 2012, the NationalBank of Moldova continued to present regularly the progressreports related to its commitments and a series of statisticaldata related to the competence of the National Bank.

In order to continue the successful implementation of the healthsector reform, the Republic of Moldova received in April 2012the fourth tranche of the financial assistance offered by theEuropean Union in the amount of EUR 4.14 million (equivalentof USD 5.47 million) within the Health Sector Policy SupportProgram.

In July 2012, the Republic of Moldova received the secondtranche of the financial assistance in the amount of EUR 12.03million (equivalent of USD 14.79 million) to continue the suc-cessful implementation of the Water Sector Policy Support Pro-gram. This program aims to decentralize the water supply


and sanitation, to promote sustainable development and en-vironmental protection measures, and to improve the legalframework with respect to minimum technical standards forwater infrastructure.

In the context of sustainable economic development of ruralareas in the Republic of Moldova, as well as to overcome theconsequences of the drought in the summer of 2012, the Re-public of Moldova received in December 2012 the third trancheof the financial assistance in the amount of EUR 3.15 million(equivalent of USD 4.16 million) to finance the Support Program- Economic Stimulation in Rural Areas.

Group of Banking Supervisors from Central and Eastern Eu-rope (BSCEE)

During 2012, the National Bank of Moldova participated inthe 25th Annual Conference on “Cross border cooperation -theory versus practice, Basel III ante portas”, hosted by theAustrian Financial Market Authority on April 23 – 26, 2012.The conference presented topics related to the measures for theconsolidation of sustainable business models of Austrian banksconducting international operations.

Also, the National Bank of Moldova took part in the 17th Inter-national Conference of BSCEE, which was held on September11 - 14, 2012 in Istanbul, Turkey. At the event were discussedtopics related to banking supervision, strengthening of the prin-ciples of liquidity risk management, strengthening of corporategovernance etc.

As the purpose of BSCEE provides, inter alia, the promotionand maintenance of close cooperation in banking supervisionbetween members and assisting in its effective implementation,BSCEE member countries have exchanged in 2012 informationand practical experience in the banking supervision area.

At the same time, with the acceptance of Armenia as a mem-ber of the BSCEE, the NBM examined and accepted in 2012a number of proposed amendments to the Agreement on theorganization and governing rules of the BSCEE and OperationalBylaws of the BSCEE Secretariat. Following the request of theCentral Bank of Georgia, the NBM agreed to its admission tomembership in BSCEE.

External technical assistance and cooperation with other in-ternational institutions, central banks and state agencies ofother states

In order to increase the operational efficiency of the NationalBank of Moldova, as well as to support the achievement of its


strategic objectives (set out in the Strategic Plan of the NationalBank for 2013-2017), the National Bank of Moldova continuedto develop the cooperation relations with international organi-zations and other central banks, including by benefiting fromtechnical assistance.

The National Bank of Moldova makes considerable efforts toachieve efficiently the primary objective to ensure and maintainprice stability. In this regard, the NBM received in 2012 techni-cal assistance in the monetary policy area from the EuropeanBank for Reconstruction and Development (EBRD), the GermanEconomic Team and the IMF. The experts offered consultancyon the inflation targeting regime, presenting analysis and recom-mendations to improve the monetary policy and the mentionedregime. The OGResearch Company, hired by the EBRD, offeredtechnical assistance in the field of macroeconomic modelingand software applications for presenting ways of creating anddeveloping dynamic general equilibrium models in macroeco-nomics. The assistance offered will help to build the NBM’scapacity for forecasting and to expand the analytical capacityin the monetary policy field - essential elements to ensure andmaintain price stability in the Republic of Moldova.

In order to develop the domestic banking system and to improveprudential regulations and the banking supervision mechanism,the National Bank of Moldova has worked during 2012 witha number of international organizations and financial institu-tions such as the IMF, World Bank, EBRD, the U.S. TreasuryDepartment, Banking Supervisors from Central and EasternEurope.

To strengthen the capacity in banking supervision and regu-lation, the NBM had a fruitful cooperation with supervisoryauthorities in other countries to make adequate exchange of in-formation. Thus, the NBM has worked with the Central Bank ofRomania, Central Bank of the Russian Federation, Central Bankof Bosnia and Herzegovina, De Nederlandsche Bank, CentralBank of Georgia and the Central Bank of Serbia.

The effects of the recent financial crisis highlighted the im-portance that central banks give to the mechanisms for crisisprevention and management. In this regard, the stress testing(stress testing exercises) is one of the main risk managementinstruments, which evolved from an instrument for estimatingthe risk and for capital management to an instrument for deter-mining the financial soundness of banks and financial stabilityin general. Thus, in the crisis management context, in orderto calculate certain data for the banking system in accordancewith Basel II, the NBM has received technical assistance fromthe World Bank representative. The assistance was aimed to


finalize the implementation of a macro prudential stress-testingmodel for credit risk.

The IMF has provided technical assistance to the National Bankof Moldova aimed at strengthening the work in preparation forthe crisis and developing a legal framework for crisis prepared-ness. The objective of the assistance was to improve the legalframework developed during the previous mission. As a resultof the recommendations set out by the IMF, the NBM managedto promote more intensively the term of financial stability ofthe banking sector.

Following the collaboration with the IMF in the context ofimproving the situation of problematic banks, the National Bankof Moldova has developed recommendations for improving themechanism for addressing these situations.

The phenomenon of money laundering remains still a ma-jor challenge for supervisors, including the National Bank ofMoldova. Thus, in order to improve banking supervision (offsiteand onsite) in the field of preventing and combating moneylaundering and terrorism financing, the U.S. Treasury Depart-ment offered to the NBM assistance to review the onsite controlmechanism and to adjust the national regulations to the bestinternational practices. The assistance will contribute to thedevelopment of onsite control procedures to prevent and combatmoney laundering and terrorism financing.

In 2012, the NBM in collaboration with the World Bank com-pleted the “Modernization of payment system” project, whichprovided a comprehensive approach to the issue of promot-ing cashless payments (financial education, incentives and taxbreaks etc.) and constituted a solid basis for future actions inthis area. This project was focused on the following compo-nents: analysis of existing premises to introduce fiscal measuresand analysis of the situation in financial education related topayment instruments (financial literacy); recommendations inthe context of improving the use of electronic payment instru-ments by consumers, including the introduction of measures forconsumer protection and financial literacy growth in retail pay-ments; recommendations on a framework based on incentivesthat promotes the acceptance of electronic payments by tradersand government, and other recommendations to help developthe payment system in the Republic of Moldova. The purposeof the project is to support the development of a comprehensivestrategy for modernizing the payment systems, to improve safetyand efficiency and to promote public confidence in paymentinstruments and, therefore, in the financial sector and financialinstitutions in general.


In achieving the objective of modernizing the infrastructure forretail payments (low value) and orientation towards universalityof payment instruments processing according to the StrategicPlan of the National Bank for 2013 - 2017, the National Bank ofMoldova has initiated the cooperation with the National Agencyfor the Promotion of the IT Industry and Financial Settlementand Telecommunications Institute in Korea.

During 2012, the National Bank of Moldova has also receivedtechnical assistance from the IMF in the context of the creationof a Single Central Depository in the Republic of Moldova, whichwill in particular minimize trading risks, increase operationalefficiency, enhance securities market credibility, modernize thesecurities settlement and increase the attractiveness for localand foreign investors.

Within this assistance, there were examined issues related toownership structure, participants and operating model of thenew depository.

In the context of cooperation with other central banks, it shouldbe mentioned that on June 1, 2012 the Bilateral Agreementbetween the National Bank of Moldova and the National Bank ofGeorgia was signed. The parties have committed themselves topromote bilateral relations in the banking sector, to collaborateand participate in the exchange of information and experiencein areas relevant to their work.

On October 9 – 11, 2012, the National Bank of Moldova hosteda mission of the De Nederlandsche Bank, consisting of represen-tatives of financial stability, banking supervision and regulationand payments system areas. During the visit, they have eval-uated the core activities of the National Bank of Moldova andhave identified technical assistance needs in the areas to beimproved. Findings of the evaluation have an important rolein the foundation of the banking supervision system and thebest practices will be applied at the time of the implementationof Basel II in the Moldovan legislation in the financial stabilityfiled, in the improvement of supervision systems, payment andsettlement systems.

In the context of its legal duties - to maintain and managethe foreign exchange reserves - the National Bank of Moldovacontinued in 2012 to participate in the RAMP program (ReservesAdvisory and Management Program) provided by the WorldBank. This program includes consultancy services providedby participating institutions through thematic seminars andindividual onsite consultations, as well as specialized softwareinstallation and use services, developed by the World Bank.


In the context of the actions related to European integration andfollowing the State Chancellery’s call for proposals to benefitfrom assistance, the National Bank of Moldova has developed aTwinning project concept. This project is aimed at strengtheningthe institutional capacity of the National Bank of Moldovain banking regulation and supervision in the context of im-plementing Basel II requirements. On August 16, 2012, theproject concept was accepted by the Inter-ministerial Commit-tee for Strategic Planning, and after that it was submitted tothe EU Delegation in Moldova for promotion. Subsequently,further steps will be taken to advance the project. It shouldbe mentioned that the Twinning projects are an initiative ofthe European Commission and is an administrative cooperationtool to support the reforms in the major areas in the candidateand potential candidate countries for EU membership. Thisinstrument is also designed to some countries of the EuropeanNeighborhood Policy, including the Republic of Moldova, inthe context of achieving the commitments under the futureMoldova-EU Association Agreement.

3.12 National Bank of Moldova employeesand professional development

The human resources policy promoted by the NBM during 2012sought to ensure the achievement of a climate that would allowbank’s employees to work efficiently and to achieve optimumresults.

On December 31, 2012, the NBM payroll was completed atthe level of 97.85 percent (456 employees of 466 permanentemployees). There are 9 doctors of technical and economicssciences working within the NBM.

In 2012, 47 employees of the bank were promoted. The averageage of the employees are persons aged up to 39 years - 257workers, or 56.36 percent of total.

During the reporting year, 120 employees of National Bankof Moldova participated in skills upgrade courses abroad and217 employees participated in skills upgrade courses organizedboth in the NBM and in the country, which contributed to theimprovement and modernization of the activity of the NationalBank of Moldova.

During 2012, the third edition of a survey of employees has beenorganized, which helped at assessing the rate of satisfaction ofemployees on different aspects of work, level of involvementetc.


3.13 Internal Audit

In 2012, the audit activities focused on audit missions andactions to further the implementation of anti-fraud policy of theNational Bank of Moldova. The annual internal audit plan in-cluded audit and follow-up missions, which involved a series ofactivities related to planning, implementation, documentationand reporting of audit results. There were conducted unan-nounced controls and inventories on some high risk areas. As aresult, the Internal Audit Department issued reports and maderecommendations aimed at optimizing the procedural rules,processes and operational activities, organizational structure.

Along with audit missions were carried out a series of consul-tative activities, consisting of participation in project teams orworking groups acting as consultant and/or observer. Therewere approved the financial statements, NBM budget execution;draft normative acts, the risk management and internal controllevel have been analyzed.

The internal audit analytical and methodological instrumen-tation was developed and focused on specific types of auditregulation, including ad-hoc missions and types of advisoryassistance, as well as the development of functions of the Docu-mentation and Management Information System of the InternalControl System of the NBM, by adding some new functionalities.

In June 2012, the Council of Administration of the NationalBank of Moldova approved the Action Plan of the National Bankof Moldova for preventing and combating fraud and corruption,including27 measures in the short and medium term. In this con-text, in the second half of 2012, the National Bank of Moldovaorganized the Antifraud Week. On November 26 – 30, 2012, theNBM organized a series of activities aimed at raising awareness,preventing and combating fraud, establishing integrated anddeveloped governance, oriented towards efficiency and quality.

In order to test and develop the knowledge in regard to theNBM Antifraud Policy, the Internal Audit Department developeda questionnaire, which during a week has been filled out bythe NBM staff. Another questionnaire prepared by the InternalAudit Department was referring to the assessment of the organi-zational culture within the NBM and the factors that influence

27The Action Plan of the National Bank of Moldova for preventing andcombating fraud and corruption is available on the official website of theNBM: http://www.bnm.md/en/nbm_organization


it in time. These questionnaires aimed at collecting information,raising the awareness of conducting the activities with theutmost responsibility and fairness, creating and maintaininga pleasant working environment, respecting ethical rules andestablishing constructive working relationships.

On an organizational level, within the Internal Audit Depart-ment were made during 2012 analyzes at the level of structureand duties carried out to determine the appropriate qualityperformance requirements. As a result, at the end of 2012, theInternal Audit Department was subject to a structural reorgani-zation to strengthen its function.

3.14 Activity of the Council of Adminis-tration of the National Bank of Moldova

During 2012 were held 54 meeting of the Council of Adminis-tration of the National Bank of Moldova, where 319 decisionshave been examined and adopted with regard to the activity ofthe financial and banking sector, and normative acts have beenapproved and amended in the following fields:

• Monetary and Foreign Exchange Policy of the NBM;

• Payments System Oversight Policy of the Republic of Mol-dova;

• Accounting Policy of the National Bank of Moldova;

• Banking Regulation and Supervision;

• Bookkeeping;

• Balance of Payments.

During 2012, 48 general decisions (Table A.42; Table A.43) ofthe Council of Administration of the National Bank of Moldovahave been submitted for publication in the Official Monitor ofthe Republic of Moldova.


3.15 Completion and amendment ofnormative acts in 2012

Foreign exchange regulation

In 2012 the NBM’s activities related to foreign exchange reg-ulation were mainly focused on finalizing the draft Law onamending and supplementing certain normative acts as to har-monize it with the Law on foreign exchange regulation, as wellas on improving its normative acts related to foreign exchangeentities activity and reporting by banks to the NBM on theforeign exchange operations.

In 2012, the Law on foreign exchange regulation no. 62-XVIof March 21, 2008 has been amended, increasing the fees forlicenses issued by the National Bank of Moldova for cash foreignexchange activity with individuals, and specifying the foreignexchange control authorities.

On May 25, 2012, the Law on amending and supplementingcertain normative acts no. 33 of March 6, 2012 has entered intoforce, which amended 53 normative acts. The law was aimedat harmonizing the normative acts with the Law on foreignexchange regulation.

Thus, to ensure the correct use of terminology related to theforeign exchange activity, a number of normative acts havebeen amended as to adjust the terminology used to the Law onforeign exchange regulation.

In terms of payments and transfers, a number of normative actshave been amended to specify the cases when residents have theright to perform payments and transfers in foreign currency onthe territory of the Republic of Moldova. At the same time, somenormative acts have been amended, which aimed at indicatingthe compulsoriness to make payments and transfers only innational currency both by residents and by non-residents. Also,some of the amendments have been determined by the need todetermine the cases when residents and non-residents have theright to conduct foreign exchange transactions in cash.

There have been made amendments that have excluded theregulation by several normative acts of the operations relatedto the export and import of currency values.


In order to reduce the number of normative acts of permissivenature was excluded the need to obtain by the duty free shopsowners the NBM authorization to trade goods against freelyconvertible foreign currency.

There have been made amendments and additions related to theregulation of peculiarities of pledging funds in national currencyand in foreign currency and the right of pledge on them.

Given the fact that the Law on foreign exchange regulationprovides for the general principles of foreign exchange opera-tions and the rules for conducting foreign currency exchangeoperations against the national currency, the Law on moneyno.1232-XII of December 15, 1992 has been amended accord-ingly.

Amendments made to the regulations for repatriation of funds,goods and services from external economic transactions haveextended some deadlines for repatriation, have reduced finan-cial penalties for failure to observe the repatriation deadlines,have expanded the list of cases that are not likely to repatriatefunds and material resources. Additionally, by amending theContravention Code, the double punishment of economic agentsfor failure to repatriate the funds and material resources hasbeen abolished.

Amendments to the Law on the National Bank of Moldovano. 548-XIII of July 21, 1995 aimed at improving the legalframework for the activities of licensed banks and the NationalBank of Moldova. In the context of the foreign exchange aspects,there have been made amendments to regulate the peculiaritiesof the application by the National Bank of Moldova of sanctionsand remedial measures to different subjects (banks, foreignexchange entities, holders of licenses and other legal permissiveacts issued by the National Bank of Moldova). The amendmentsmade a demarcation between sanctions and remedial measures,there have been regulated the way the infringements are identi-fied, the way the penalties and remedial measures are applied,their legal effects, the governing bodies of the National Bank ofMoldova empowered to issue decisions on remedial measuresand sanctions, the peculiarities of executing these decisions, theobligations and rights of persons to whom these are applied etc.

In 2012, the amendments and additions to the Regulation onforeign exchange entities have been approved. Their necessitywas caused mainly by the following needs:

• To specify some aspects of conducting on-site inspections bythe NBM at the foreign exchange entities.


In this regard, in order to increase the efficiency of the on-siteinspections at the foreign exchange entities, the regulation wasamended with provisions related to the right of the NBM on-siteinspection team to attract witnesses and to use video, audio, andphoto means for certifying the facts found during the on-siteinspections.

The amendments specify the person who may be attracted as awitness assistant, his/her rights and obligations with respect tothat inspection. Also, in order to raise the level of transparencyof the NBM on-site inspection teams, the regulation has beencompleted with the specimen of the act showing the inspec-tion results and with provisions relating to the completion andsigning of the act in question.

• To specify the methods the funds contributions can be paidup in the share capital of foreign exchange entities, includingfor capital increase.

In order to strengthen the measures in the context of legislationon preventing and combating money laundering and terrorismfinancing, according to the amendments made, the foreignexchange offices are required to pay up the funds contributionsin their share capital, including for capital increase, only byregistering the funds in the accounts of the foreign exchangeoffice/branches thereof opened with the licensed banks, asevidence serving the documents provided for in the Regulation.

In this context, there have been specified the documents tobe submitted to the NBM by the foreign exchange office forconfirmation of funds to obtain the license/authorized copy ofthe license, as well as the requirements for these documents.

Following the amendment of the Customs Code by the Law onamending and supplementing certain normative acts no.33 ofMarch 6, 2012, the Regulation on the procedure for issuanceby the National Bank of Moldova of the permit for sale of goodsagainst freely convertible foreign currency in duty-free shops wasrepealed, and the appropriate authorizations/permits of theNBM have lost their validity. This has resulted in the reductionof the number of reports submitted by the economic agents tothe NBM by cancelling the presentation of the report on foreigncurrency obtained from the sale of goods in these shops.

In 2012, the regulations in foreign exchange field related to re-porting by banks to the National Bank of Moldova have beenamended.

Thus, the process of reporting by banks to the National Bankof Moldova has been optimized, by removing irrelevant and


redundant information. At the same time, for the purpose ofsupervision of licensed banks exposure to the counterparty riskassociated with funds invested by banks in securities, a newreport with the appropriate information has been introduced.

In the context of the transition to the new system of reportingby banks to the National Bank of Moldova (SIRBNM) and inconnection with the amendment and completion of the Chartof accounts of the bookkeeping of the licensed banks of theRepublic of Moldova, the forms of some reports related to theforeign exchange activity were modified, being exposed into anew form as required for switching to SIRBNM reporting andthe procedures for completing the modified reports have beenpresented in a new version or amended, as appropriate.

At the same time, the regulatory framework governing thereporting process has been optimized. The new form of theReport on correspondent accounts and other placements oflicensed banks was included in the Instruction on reporting offoreign exchange transactions by licensed banks and Instructionon the Report on correspondent accounts and other placementsof licensed banks was repealed.

In order to implement the measures to contribute to one of thestrategic objectives of the National Bank of Moldova for 2013-2017, namely increasing the operational efficiency of the NBM,a unique trading platform for monetary instruments and foreignexchange instruments was provided for to be implemented.

In this sense, the Concept of implementation of a unique tradingplatform for monetary instruments and foreign exchange instru-ments was approved, which reflected the vision of the NationalBank of Moldova on the implementation of a unique tradingplatform for monetary policy operations of the NBM, tradingof securities on the primary and secondary markets, trading ofmonetary instruments and foreign exchange instruments on theinterbank market and the conceptual description of the platformto be implemented.

The concept specified the goals and objectives of implementing aunique trading platform, established the basic principles soughtin creating the platform in question, presented the architectural,functional, and security description of the trading platform,comparative analysis of the strategies of implementation andthe impact of the trading platform implementation.

Following the approval of this concept, the process of adjustingthe regulatory framework for implementing the unique tradingplatform has been started.


Prudential regulation

In order to ensure a raising safety in the banks’ activity, theNBM has undertaken in 2012 a series of actions aimed atstrengthening the domestic banking sector. Thus, the bankingregulation and supervision has been further improved.

Therefore, to further strengthen the banks reporting process andto achieve a high level of harmonization and convergence inreporting requirements, the Instruction on FINREP financial situ-ations at individual level, applicable to banks has been amendedand supplemented with additional reports. Thus, banks areto submit new reports related to: the classification of loansand advances by type of product (FIN 6A), the classificationof loans and advances by collateral and guarantees (FIN 6B),the adjustment variations for impairment and impairment ofequity instruments (FIN 9B), the collateral held that can besold or given in guarantee (FIN 9C), the assets acquired duringthe period of taking into possession of collateral held (FIN 9D),the tangible and intangible assets: assets that are the object ofthe operational lease (FIN 13B) , geographical distribution ofassets (FIN 15A), geographical distribution of debts (FIN 15B),statement of comprehensive income (FIN 21).

Some of the amendments to the above-mentioned Instructionwere conducted to specify certain aspects of the coverage bythe banks of the information in the FINREP reports, as wellas the control relations were established between reports anddirectly within the reports on vertical and horizontal positions(Decision of the Council of Administration of the National Bankof Moldova no.189 of August 23, 2012, Decision of the Councilof Administration of the National Bank of Moldova no.310 ofDecember 27, 2012).

In the context of promoting the macroeconomic policy relax-ation by the National Bank of Moldova, the Regulation on RiskWeighted Capital Adequacy has been amended, by excludingthe requirements to increase the risk weighted capital adequacyratio to 18 percent - from June 30, 2013 and 20 percent -from June 30, 2014. These changes were aimed at increasingthe access to bank loans for economic agents, reducing theprudential requirements for risk weighted capital adequacy(Decision of the Council of Administration of the National Bankof Moldova no.301 of December 20, 2012).

To stimulate banks’ lending activity, the Regulation on the clas-sification of assets and contingent liabilities was amended, bya less restrictive classification of loans secured with financial


guarantees granted within special projects by the internationalfinancial organizations and legal entities whose main activity isto guarantee loans and whose patrimony consists mostly of hold-ings of licensed banks or the State. Also, there were included inthat Regulation amendments related to the possibility to reviewthe interest rate on renegotiated loans, to classify the prolongedloans in more favorable groups, taking into account the abilityof fulfilling the commitments undertaken by the debtor, to detailthe classification of assets transmitted into possession to thebank in exchange for loan repayment, and there was specifiedthe term for the formation of general reserves for banking risks(Decision of the Council of Administration of the National Bankof Moldova no.301 of December 20, 2012).

Through the amendments made to the Regulation on bank trans-actions with affiliated persons were included provisions on theneed to review and approve by the bank’s board the transactionafter an affiliate relationship has occurred, and to review at leastonce a year the transactions with affiliated persons (Decision ofthe Council of Administration of the National Bank of Moldovano.301 of December 20, 2012).

In order to protect the interests of individuals and legal entitiesthat benefit from banking services, the Regulation on disclosureof information on their financial activity by licensed banks ofthe Republic of Moldova has been amended, by extending thepossibility to use by all persons (both individuals and legal enti-ties) the cost simulator to determine the total cost of credit andthe total payment of the deposit, the requirements for disclosureof information by banks related to bank cards, the conditionsfor deposits acceptance, which will include the deposit amount,the term of acceptance, the interest rate (variable/fixed), themethod of calculating the interest rate, the necessary documentsfor opening deposit accounts etc. At the same time, also wereimproved the requirements for financial positions that need tobe disclosed by banks under the new reporting requirements(Decision of the Council of Administration of the National Bankof Moldova no.147 of June 21, 2012).

The Regulation on licensing of banks no.23/09-01 has beenamended with provisions according to which the NBM shallobtain information related to general meetings of shareholdersof the banks. Thus, the banks shall present information on thegeneral meeting agenda, date, time and place of the meeting, itsform and the copy of the publication in which the advertisementon the general meeting of shareholders was placed (exceptwhere shareholders representing the entire share capital ofits holding decide unanimously) (Decision of the Council ofAdministration of the National Bank of Moldova no.91 of April12, 2012).


The Regulation on the banks’ open foreign exchange position,the Regulation on the procedures for the preparation and sub-mission of audit findings, the Regulation on credit extensionsto banks employees no.33/09-01, the Regulation on mergersand absorptions of banks in the Republic of Moldova, the Regu-lation on equity investments of banks in legal entities, and theRegulation on branches, representatives offices and secondaryoffices have been amended as a result of switching of licensedbanks to the international financial reporting standards (IFRS),amending of the Chart of Accounts, harmonizing the normativeacts with the amendments made to the legislation, includingthe terminology used in the legislation in force, and with thesupervisory practice (Decision of the Council of Administrationof the National Bank of Moldova no.194 of August 23, 2012,no.195 of August 23 ,2012, no.196 of August 23, 2012, no.197of August 23, 2012, no.198 of August 23, 2012 and the Deci-sion of the Council of Administration of the National Bank ofMoldova no.301 of December 20, 2012).

Payment systems regulation

One of the major achievements in the field of regulation for2012 was the adoption of the Law no.114 of May 18, 2012 onpayment services and electronic money, which transposed two EUdirectives (Directive 2007/64/EC on payment services in the in-ternal market and the Directive 2009/110/EC on the taking up,pursuit and prudential supervision of the business of electronicmoney). The law was drafted to facilitate the implementation ofmodern payment instruments, to increase the level of protectionof payment service users and to ensure market access for non-bank payment service providers, to enhance competitivenessand improve the quality of payment services.

In 2012, the NBM’s activity related to regulation in the paymentsystems has also involved the improvement of the existingregulatory framework.

Thus, in order to ensure compliance with the internationalpractice, efficiency and facilitation of international transfers(minimizing errors, processing time and reducing costs), the Reg-ulation on credit transfer has been amended by the Decision ofthe Council of Administration of the National Bank of Moldovano.141 of June 21, 2012. These amendments allowed theimplementation of IBAN (International Bank Account Number)for transfers made/received to/from abroad and the creationof the Concept for optimizing the international transfers andapplicable supervisory framework (approved by the Decision ofthe Council of Administration of the NBM no. 196 of September22, 2011).


In addition, the Regulation on automated interbank paymentsystem and the Regulation on oversight of automated interbankpayment system have been amended and supplemented withregard to the integration of the National Securities Depositoryin AIPS and the optimization of management mechanisms ofoperational and liquidity risk. The Regulation on bankcardswas also amended, by including innovative aspects designed tooptimize the use of bankcards.

Monetary statistics regulation

In 2012, the Instruction on reporting of interest rates appliedby banks in the Republic of Moldova (Decision of the Councilof Administration of the National Bank of Moldova no.242of October 23, 2012) and the Instruction on filling out by thelicensed banks of the Report on monetary statistics (Decision ofthe Council of Administration of the National Bank of Moldovano.243 of October 23, 2012) have been amended.

The need to supplement and amend those instructions was dueprimarily to the amendments and completions made to theChart of accounts of bookkeeping of the licensed banks of theRepublic of Moldova, which entered into force on November 1,2012.

At the same time, in the amended report on monetary statistics,the balances of loans and deposits of the institutional sub-sector “Households” are divided into categories: individualsand individuals performing an activity, which helps to improveaccuracy of existing monetary statistics and analysis of dataon the balances of loans and deposits of individuals and legalentities from the institutional sector “Other resident sectors”.

Similarly, the Instruction on reporting of interest rates appliedby banks in the Republic of Moldova has been supplementedwith the calculation base for the interest rates applied by bankswith a new group of accounts for the bookkeeping of loansgranted to services provision. There have been also excludedthe accounts of Class 4 “Income” in calculating the balancesof loans and accounts of Class 5 “Expenses” in calculating thebalances of deposits.


3.16 Analysis of financial situation for 2012

General considerations

In accordance with the Law on the National Bank of Moldovano.548-XIII of July 21, 1995, the fundamental objective of theNational Bank of Moldova is to achieve and maintain pricestability.

The basic functions of the NBM are provided in the Law onNational Bank of Moldova. In accordance with this, the NBMoperations are performed in order to promote and support themonetary and foreign exchange policy in the state, to ensure thecontinuing stability of the banking system, national currencyissuance, foreign exchange reserves management etc. Accord-ingly, maximizing the profit from the activity of the NBM is nota purpose itself and cannot serve as an impediment to achieveits fundamental objective and functions.

Profit available for distribution

The financial results of the NBM are directly dependent on theneed to conduct monetary and foreign exchange operations inorder to achieve the fundamental objective and fulfill the basicfunctions of the NBM.

The evolution of the level of the profit available for distributionduring 2008-2012 is shown in Chart 3.65.

According to the Law on the National Bank of Moldova, theamount of profits available for distribution is distributed in theamount of 50.0 percent for the increase of statutory capital andthe amount of 50.0 percent is transferred to the state budget.

Chart 3.65: Evolution of profit available fordistribution during 2008-2012

57.88 70.92227.10

-1,431.20

673.16

-1500

-1000

-500

0

500

1000

2008 2009 2010 2011 2012

mil. MDL

Source: NBM

According to the financial statement, the NBM registered at theend of 2012 a profit available for distribution in the amountof MDL 227.10 million, which is characterized mainly by thefollowing developments as compared to the situation of 2011(MDL 70.92 million):

The events that had a positive impact on the profit available fordistribution:


• The increase in revenues from foreign exchange reservesmanagement with about MDL 135 million due to higherinterest-related income on securities and foreign currencyinvestments and the higher income from operations inforeign currency.

• The reduction of expenditure related to the sterilizationoperations with about MDL 82 million due to the reductionof interest rate on the NBC placed.

• The reduction of expenditure related to required reserveswith about MDL 30 million over the same period of 2011.While required reserves in MDL, USD and EUR increasedcompared with 2011, due to the positive development ofattracted funds subject to reservation in national currencyand in FCC, the reduction of expenditure was due to thedecrease in interest rates applied to maintain the requiredreserves in MDL. The average interest rate on overnightdeposits, applied for the payment for the required reservesmaintained in MDL, decreased from 5.66 percent in Jan-uary 2012 to 1.50 percent in April 2012, while in 2011 ithas evolved from 4.81 percent in January to 7.00 percentin December.

The events that had a negative impact on the profit availablefor distribution:

• The decrease in revenues from the amortization of thediscount on state securities with about MDL 82 million,due to holding in the NBM portfolio of state securities withlower interest rates during 2012 compared with 2011. Theaverage interest rate in 2012 was 6.56 percent (2011 -9.73 percent). The average balance of state securitiesheld in the NBM portfolio decreased slightly in 2012,accounting for MDL 2196.00 million (2011 - MDL 2213.4million). The volume on selling-buying price of SS held inthe NBM portfolio was MDL 2063.4 million on December31, 2012. The average interest rate for the portfolio of SSheld by the bank was 4.50 percent on December 31, 2012(on December 31, 2011 - 11.02 percent).

• The decrease in interest-related income on loans grantedto banks on medium term by about MDL 15 million, whichwas due to the reduction of the balance of loans followingthe full repayment of loans granted for lending to thereal sector of the economy and paying installments atmaturity of the loan to protect the integrity of the bankingsystem and applying a lower interest rate. The averageweighted interest rate in 2012 was 0.01 percent (2011- 2.42 percent). The average balance of loans in 2012


amounted to MDL 336.81 million (2011 - MDL 608.18million).

The impact of the aforementioned events on the profit availablefor distribution is presented in Table A.30 by activities of theNational Bank of Moldova conducted during 2012.

The impact of monetary policy on the financial si-tuation of the National Bank of Moldova

The persistence of excess liquidity in the banking system promp-ted the National Bank to utilize the absorption of liquidityinstruments throughout 2012. During this time, the averagedaily balance of liquidity sterilization operations was MDL3751.9 million (2011 – MDL 3232.9 million). At the sametime, the costs of sterilization operations through the issuanceof National Bank certificates decreased, accounting for aboutMDL 193 million in 2012 compared to MDL 275 million in 2011.The decrease in the expenditure from the amortization of thediscount on NBM certificates was due to the decrease in theinterest rate of NBM certificates placed. The average interestrate on NBM certificates placed in 2012 was 5.05 percent (2011- 8.54 percent). NBM certificates were issued at the NBM baserate, decreasing from 9.50 percent in January 2012 to 4.50percent in December 2012.

The monetary policy instruments applied by the National Bankduring 2012 generated a net loss of MDL 116.04 million, rep-resenting a decrease of 20.83 percentage points compared to2011 (Table A.31).

The impact of state foreign exchange reserves man-agement operations on the financial situation ofthe National Bank of Moldova

Foreign exchange reserves of the State, held by the NBM, roseby 27.77 percent as of December 31, 2012 or by USD 545.37million compared to December 31, 2011 (from USD 1964.08million to USD 2509.45 million), invested mainly in instru-ments in USD and EUR. The increase of the share of foreignexchange reserves generated an income growth related to themanagement of the foreign exchange reserves and other foreigncurrencies operations by MDL 135 million in 2012, reaching thelevel of MDL 412.28 million (compared to MDL 277.75 millionin 2011).


The impact of foreign exchange reserves management opera-tions on the financial activity of the National Bank is presentedin Table A.32.

The increase of the profitability rate of securities was one ofthe factors that influenced the increase in the income relatedto the management of the foreign exchange reserves Chart3.66. Thus, the profitability rate of securities issued by non-residents increased from 1.6654 percent annually in 2011 to1.8121 percent in 2012, due to increased portfolio of securitiesheld to maturity. The securities issued by non-residents butheld by the NBM in its portfolio are mainly represented by thesecurities issued by the Governments and Government agenciesfrom USA, EU, and securities issued by supranational institu-tions. The share of securities issued by non-residents in the totalinvestment portfolio in the reporting period was 61.18 percent.

Chart 3.66: Evolution of the foreign ex-change reserves profitability in 2012 com-pared to 2011

1.29%1.67%

0.53%1.34%

1.81%

0.42%

0.0%

0.5%

1.0%

1.5%

2.0%

Deposits in foreigncurrency

Securities inforeign currency

Total Portfolio

2011 2012

Source: NBM

The weighted average rate of the term deposits profitabilitydecreased from 0.5324 percent in 2011 to 0.4192 percent in2012.

It should be mentioned that in accordance with best interna-tional practices and the Law on the National Bank of Moldova, themain criteria for selection of reserve assets are the ensuring ofbasic amounts and liquidity. Thus, only after ensuring these twocriteria, the instruments profitability in which the state foreignexchange reserves are invested shall be taken into account.

The evolution of the official foreign exchange rate of the MDLagainst the currencies in which the foreign exchange reservesare held had a significant impact on the financial situation ofthe National Bank of Moldova. Its dynamics and the averageannual values are shown in Table A.33.

At the end of 2012, foreign exchange rate fluctuations resultedin recording of unrealized income from the exchange differencesin the amount of MDL 846.01 million, from which unrealizedincome from the exchange differences on revaluation of foreigncurrency stocks - MDL 714.82 million and from the revaluationof securities investment - MDL 131.19 million, which weretransferred to the respective accounts.

Capital and reserves

The activities conducted by the National Bank during 2012, inorder to fulfill its basic duties, had an impact on the bank’sbalance sheet structure (Table A.34).


The situation of capital and reserves is reflected in TableA.35.

As of June 26, 2012, according to the Law no.119 of May 24,2012 to amend the Law on state budget for 2012, the authorizedcapital of banks increased by MDL 41.09 million - equivalentto the value of gold bullions transmitted from the State fundof precious metals and precious stones. Thus, the authorizedcapital f the NBM was MDL 330.02 million on December 31,2012.

On December 31, 2012, the debit balance of general reservefund decreased by MDL 113.55 million, as a result of recordinga profit available for distribution in the amount of MDL 227.10million and of its use in the amount of 50 percent for statutorycapital increase, according the Law on the National Bank ofMoldova. Thus, the debit balance of the general reserve fundtotaled MDL 596.40 million on December 31, 2012 (2011 - MDL709.95 million).

The debit balance of the general reserve fund recorded at theend of 2008 - 2011 was not covered by the Ministry of Financeduring 2009 - 2012 by issuing state securities in accordancewith the Law on the National Bank of Moldova.

As on December 31, 2012, bank capital and reserves recordeda positive level in the total amount of MDL 780.67 million, in-creasing as compared to December 31, 2011 under registrationof unrealized income from exchange differences on revaluationof foreign currency stocks in the amount of MDL 714.82 millionand from the revaluation of securities investment - MDL 131.19million, which were transferred to the respective accounts.

120

List of Figures

1.1 The average annual growth rate in world economy (%) . . . . . . . . . . . . . . . . 9

1.2 Average annual growth rate in advanced economies in 2012 (%) . . . . . . . . . . 9

1.3 Average annual growth rate of GDP and CPI in Romania (%) . . . . . . . . . . . . . 10

1.4 Average annual growth rate of GDP and CPI in Russian Federation (%) . . . . . . . 11

1.5 Average annual growth rate of GDP and CPI in Ukraine (%) . . . . . . . . . . . . . 11

1.6 Average annual growth rate of world price index (%) . . . . . . . . . . . . . . . . 12

1.7 Evolution of natural gas (USD/1000m3) s, i petrol (USD/barrel) . . . . . . . . . . . 12

1.8 Monthly evolution of exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . 13

1.9 Average unemployment rate in euro area and neighboring economies (%) . . . . . 13

2.1 Contribution of demand components to the GDP growth (p.p.) . . . . . . . . . . . . 14

2.2 Contribution of economic sectors to the GDP growth (p.p.) . . . . . . . . . . . . . . 15

2.3 Contribution of components (p.p.) to the household final consumption growth (%) 16

2.4 Contribution of funding sources (p.p.) to the real growth of household consumption(%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

2.5 Gross fixed capital formation (%, versus the same period of the previous year) . . . 16

2.6 Structure of investments in fixed capital by funding sources in 2012 . . . . . . . . 17

2.7 The evolution of industrial output in real terms (%, versus the same period of theprevious year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

2.8 The evolution of domestic trade (%, versus the same period of the previous year) . 18

2.9 The evolution in real terms of foreign trade (%, versus the same period of the previousyear) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

2.10 Volume of transported goods (%, versus the same period of the previous year) . . . 19

2.11 Global agricultural production (%, versus the previous year) . . . . . . . . . . . . . 19

LIST OF FIGURES 121

2.12 Evolution of unemployment and employment (%) . . . . . . . . . . . . . . . . . . . 20

2.13 Active and employed population (%, versus the previous year) . . . . . . . . . . . . 20

2.14 Distribution of persons employed by the activities of national economy (%, versusthe previou year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

2.15 Real average wage * (%, versus the previous year) . . . . . . . . . . . . . . . . . . 21

2.16 Real average wage in industry (%, versus the previous year) . . . . . . . . . . . . . 21

2.17 The annual rate of CPI and core inflation (%) . . . . . . . . . . . . . . . . . . . . . 21

2.18 The annual rate of inflation subcomponents (%) . . . . . . . . . . . . . . . . . . . . 22

2.19 The dynamics of annual inflation and subcomponents contribution (p.p.) . . . . . . 22

2.20 Subcomponents contribution to the annual growth rate of core inflation (p.p.) . . . 23

2.21 Components contribution to the annual growth of food prices (p.p.) . . . . . . . . 23

2.22 Components contribution to the annual growth of regulated prices (p.p.) . . . . . 24

2.23 Components contribution to the annual growth of fuel price (p.p.) . . . . . . . . . 25

2.24 Annual rate of IPPI (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

2.25 Evolution of construction price index (%, versus the same period of the previous year) 26

2.26 The national public budget indicators . . . . . . . . . . . . . . . . . . . . . . . . . 26

2.27 The dynamic of tax revenues’ structure . . . . . . . . . . . . . . . . . . . . . . . . . 27

2.28 Sectoral distribution of public expenditure . . . . . . . . . . . . . . . . . . . . . . . 27

2.29 The evolution of public budget deficit . . . . . . . . . . . . . . . . . . . . . . . . . 27

2.30 The state debt as a share in GDP (%) . . . . . . . . . . . . . . . . . . . . . . . . . . 28

2.31 Current acount - main components (milllion, USD) . . . . . . . . . . . . . . . . . . 29

2.32 Main trading partners of the Republic of Moldova in 2012 (milllion, USD) . . . . . 29

2.33 The annual dynamics of energy and electricity products imports (million, USD, f.o.b.prices) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

2.34 Structure of imports of goods by major economic categories in 2012 . . . . . . . . 30

2.35 Capital and financial account, main components (million, USD) . . . . . . . . . . . 32

2.36 Foreign direct investment in the national economy* (milion, USD) . . . . . . . . . 32

LIST OF FIGURES 122

2.37 Other investments – financial assets, net flows (milion, USD) . . . . . . . . . . . . 33

2.38 Other investments – financial liabilities, net flows (million, USD) . . . . . . . . . . 33

2.39 External loans, at the end of period, by sectors (million, USD) . . . . . . . . . . . . 34

2.40 Evolution of external debt to GDP (%) . . . . . . . . . . . . . . . . . . . . . . . . . 34

2.41 The ratio of public and publicly guaranteed external debt to exports of goods andservices (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

2.42 The ratio of public and publicly guaranteed external debt to government revenues (%) 35

2.43 The ratio of public external debt service* to exports of goods and services (%) . . . 35

2.44 Public external debt service* pressure on public finances (%) . . . . . . . . . . . . 36

2.45 Coverage ratio of short-term external debt by official reserve assets (%) . . . . . . . 36

3.1 Monthly evolution of interest rates corridor (%) . . . . . . . . . . . . . . . . . . . . 44

3.2 Evolution of the reference rate on interbank market and the NBM base rate (%) . . 45

3.3 Balance of sterilization operations (million, MDL) conducted by the NBM in 2012 . 46

3.4 Evolution of attracted funds in MDL, of required reserves in MDL and of the requiredreserves ratio in 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

3.5 Evolution of required reserves in USD and EUR during 2012 . . . . . . . . . . . . . 49

3.6 Evolution of the official exchange rate of MDL/USD and the volume of daily transac-tions of the NBM in 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

3.7 Evolution of M2 money supply components (%, increase versus the same month ofthe previous year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

3.8 Dynamics of main components of M3 money supply (%, increase versus the samemonth of the previous year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

3.9 Evolution of credits in the economy (%, increase versus the same month of theprevious year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

3.10 The balance of credits granted to the economy (%, increase versus the same monthof the previous year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

3.11 Dynamics of the volume and average rates of new loans granted in the nationalcurrency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

3.12 Dynamics of the volume and average rates of new loans granted in the foreign currency 54

LIST OF FIGURES 123

3.13 Average interest rates in MDL (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

3.14 Dynamics of the volume and average rates of term deposits in national currency . . 55

3.15 Dynamics of the volume and average rates of term deposits in foreign currency . . 56

3.16 Evolution of banking margin on operations in national and foreign currency (p. p.) 56

3.17 The volume of supply, demand and sales of SS (million, MDL) . . . . . . . . . . . . 57

3.18 Monthly dynamics of state securities in primary market auctions in 2012 . . . . . . 57

3.19 The structure of SS issuances by types in 2011 . . . . . . . . . . . . . . . . . . . . . 57

3.20 The structure of SS issuances by types in 2012 . . . . . . . . . . . . . . . . . . . . . 58

3.21 The dynamics of nominal interest rates on SS (%) . . . . . . . . . . . . . . . . . . 58

3.22 Evolution of interest rates (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

3.23 Dynamics of the volume of SS in circulation at the end of the period (million, MDL) 59

3.24 Dynamics of indicators on the secondary market . . . . . . . . . . . . . . . . . . . 59

3.25 Structure of SS purchases at auctions on the primary market by categories ofparticipants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

3.26 Selling-buying transactions performed by the primary dealers on the secondarymarket (million, MDL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

3.27 The structure of state securities in circulation in the holders’ profile as on 31.12.2011 63

3.28 The structure of state securities in circulation in the holders’ profile as on 31.12.2012 63

3.29 Fluctuations of the official exchange rate of MDL . . . . . . . . . . . . . . . . . . . 66

3.30 Contribution of the main trading partners of the RM to the real effective exchangerate modification during 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

3.31 Dynamics of the nominal and real effective exchange rate of the national currencycalculated based on the weight of the main trading partners for Dec.2007 – Dec. 2012 66

3.32 Coverage of net foreign currency sales to legal entities by the net supply of foreigncurrency from individuals and the dynamics of the nominal exchange rate of thenational currency against the U.S. dollar . . . . . . . . . . . . . . . . . . . . . . . . 67

3.33 The growth rate of net supply of foreign currency from individuals and net sales offoreign currency to legal entities compared to the same period of the previous year 67

3.34 Dynamics of disposable funds in foreign currency and the official nominal exchangerate of MDL against USD during 2012 . . . . . . . . . . . . . . . . . . . . . . . . . 67

LIST OF FIGURES 124

3.35 Evolution of foreign exchange reserves expressed in months of goods and servicesimports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

3.36 Evolution of balance sheet assets of the licensed banks (million, USD) and of theofficial exchange rate of national currency against the U.S. dollar (MDL/USD) . . . 70

3.37 Dynamics of disposable funds in foreign currency (equivalent in millions USD) . . 71

3.38 Profitability rates for state securities with maturities of 2 years (%) . . . . . . . . . 75

3.39 Base rates in USA, EU, Great Britain, Switzerland, and Japan (%) . . . . . . . . . . 75

3.40 Foreign exchange reserves structure at the end of 2008 - 2012 (million, USD) . . . 76

3.41 Normative foreign exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

3.42 Foreign exchange reserves as of 31.12.2012 . . . . . . . . . . . . . . . . . . . . . . 76

3.43 Dynamics of assets concentration of the banking system of the Republic of Moldovaby groups of banks (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

3.44 Dynamics of assets, credits and deposits to GDP (%) . . . . . . . . . . . . . . . . . 78

3.45 Dynamics of the structure of credit portfolio and financial leasing of the bankingsector of the Republic of Moldova according to the level of investment operationsrisk as of 02.01.2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

3.46 Dynamics of the structure of credit portfolio and financial leasing of the bankingsector of the Republic of Moldova according to the level of investment operationsrisk as of 31.12.2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

3.47 Dynamics of banking capital of the Republic of Moldova in 2012 (million, MDL) . . 81

3.48 Concentration of Tier I capital of the banking sector of the Republic of Moldova bygroups of banks (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

3.49 Dynamics of liabilities’ concentration of the banking system of the Republic ofMoldova by group of banks (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

3.50 Dynamics of liquid assets (million, MDL) and thier share in total assets (%) of thebanking sector of the Republic of Moldova . . . . . . . . . . . . . . . . . . . . . . . 84

3.51 Dynamics of banking income and expenses in the Republic of Moldova during 2011-2012 (million, MDL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

3.52 Dynamics of the net interest margin, the return on assets and return on equity in thebanking system of the Republic of Moldova (%) . . . . . . . . . . . . . . . . . . . . 86

3.53 Evolution of banknotes in circulation (in terms of value) . . . . . . . . . . . . . . . 92

3.54 Evolution of banknotes in circulation (in terms of quantity) . . . . . . . . . . . . . 93

LIST OF FIGURES 125

3.55 Structure of banknotes in circulation by face value at the end of 2012 (in terms ofquantity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

3.56 Structure of banknotes in circulation by face value at the end of 2012 (in terms ofvalue) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

3.57 Evolution of coins in circulation (in terms of quantity) . . . . . . . . . . . . . . . . 94

3.58 Evolution of coins in circulation (in terms of value) . . . . . . . . . . . . . . . . . . 94

3.59 Banknotes issued in 2012 (in terms of quantity) . . . . . . . . . . . . . . . . . . . . 94

3.60 Coins issued in 2012 (in terms of quantity) . . . . . . . . . . . . . . . . . . . . . . . 95

3.61 Banknotes withdrawn from circulation in 2012 (in terms of quantity) . . . . . . . 95

3.62 Banknotes withdrawn from circulation in 2011 (in terms of quantity) . . . . . . . 95

3.63 Structure of counterfeited banknotes by their face value identified in 2012 (in termsof quantity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

3.64 Structure of counterfeited banknotes by their face value identified in 2011 (in termsof quantity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

3.65 Evolution of profit available for distribution during 2008-2012 . . . . . . . . . . . 115

3.66 Evolution of the foreign exchange reserves profitability in 2012 compared to 2011 118

126

List of Tables

3.1 Weighted average annual nominal rates of interest on state securities by maturity (%) 59

A.1 The balance of payments of Moldova (main aggregates) (USD, million) . . . . . . . 129

A.2 Dynamics of foreign trade in services . . . . . . . . . . . . . . . . . . . . . . . . . . 130

A.3 Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130

A.4 Current transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

A.5 External assets and liabilities, net flows . . . . . . . . . . . . . . . . . . . . . . . . . 131

A.6 Direct investments in the national economy and abroad, flows (million, USD) . . . 132

A.7 External loans (million, USD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

A.8 Gross external debt of the Republic of Moldova, at the end of period (million, USD) 134

A.9 Public external debt, publicly guaranteed and private non-guaranteed debt (million,USD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

A.10 Foreign loans and SDR allocations, at the end of period, specification of creditors(million, USD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

A.11 The evolution of credit indebtedness of the banks to the NBM in 2012 (million, MDL)137

A.12 Total turnover of the domestic foreign exchange market operations (purchases/salesof the foreign currency against MDL) (equivalent in million USD) . . . . . . . . . . 137

A.13 Structure of turnover of foreign exchange transactions on the domestic foreignexchange market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

A.14 The main sources of foreign currency purchases by the licensed banks from Moldovain the domestic foreign exchange market (the equivalent in millions USD) . . . . . 138

A.15 The main selling directions of foreign currency by licensed banks of the Republic ofMoldova on the domestic foreign exchange market (equivalent in million, USD) . . 138

A.16 Net balance of purchases/sales operations of foreign currency against MDL (equiva-lent in million, USD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

A.17 Balance sheet assets in foreign currency of banks (equivalent in million USD) . . . 139

LIST OF TABLES 127

A.18 Loans in foreign currency granted by banks (equivalent in million USD) . . . . . . 139

A.19 Disposable funds in foreign currency of the licensed banks (equivalent in million, USD)140

A.20 Disposable funds in foreign currency of banks, by types of currency (equivalent inmillion USD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

A.21 Balance sheet liabilities in foreign currency of banks (equivalent in million USD) . . 140

A.22 Total deposits in foreign currency of bank’s clients (equivalent in millions, USD) . . 141

A.23 Conditional assets and liabilities of licensed banks in foreign currency (equivalent inmillion, USD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141

A.24 Limits on investment and constraints imposed by the NBM in the investment riskmanagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141

A.25 Dynamics of the structure of assets in the banking sector of the Republic of Moldova(%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

A.26 The structure of the loan portfolio of licensed banks in the Republic of Moldova byindustry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143

A.27 Dynamics of liabilities structure of the banking sector of the Republic of Moldova . 144

A.28 Commemorative coins issued in 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . 144

A.29 IMF financial arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144

A.30 Analysis of profit available for distribution in conjunction with the main activities ofthe NBM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

A.31 Net result from the monetary policy implementation . . . . . . . . . . . . . . . . . 145

A.32 Net result from the management of foreign exchange reserves held by the NBM . . 145

A.33 Evolution of the official exchange rate . . . . . . . . . . . . . . . . . . . . . . . . . 145

A.34 Share of significant balance sheet items (%) and the annual average rates related tothe financial instruments (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

A.35 Capital and reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

A.36 Monetary policy decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

A.37 Monetary indicators (million, lei, at the end of period) . . . . . . . . . . . . . . . . 147

A.38 Average weighted rate on term deposits . . . . . . . . . . . . . . . . . . . . . . . . 148

A.39 Average weighted rate on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

A.40 Profit rate of issued on the primary market(%) . . . . . . . . . . . . . . . . . . . . . 150

A.41 Official exchange rate (MDL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150

A.42 List of decions of the Council of Administration of the National Bank of Moldovasubmitted for publication in the Official Monitor of the Republic of Moldova in Isemester 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

A.43 List of decions of the Council of Administration of the National Bank of Moldovasubmitted for publication in the Official Monitor of the Republic of Moldova in IIsemester 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152


Appendix A

Statistical tables

Chapter A. Statistical tables 129

Table A.1: The balance of payments of Moldova (main aggregates) (USD, million)

2008 2009 2010 2011 2012 pr.

CURRENT ACCOUNT -972.81 -446.70 -448.99 -790.37 -510.87Goods and services -3216.40 -1988.57 -2283.03 -2872.03 -2945.26Goods -3223.23 -1948.82 -2219.52 -2869.43 -2924.18

Export (FOB), of which: 1645.91 1326.92 1590.44 2277.06 2227.98alcoholic beverages 193.11 157.26 175.84 177.81 210.65

Import (FOB), of which: -4869.14 -3275.74 -3809.96 -5146.49 -5152.16energy (excluding electricity) -903.24 -652.99 -732.77 -1046.76 -1039.51

Services 6.83 -39.75 -63.51 -2.60 -21.08Export 843.90 673.11 700.31 881.47 936.32Import -837.07 -712.86 -763.82 -884.07 -957.40

Income 604.79 321.24 507.12 565.90 829.29inflow, of which: 906.22 592.06 767.16 927.49 1044.27

income of residents from labor 842.00 563.42 742.96 899.03 1005.99outflow, of which: -301.43 -270.82 -260.04 -361.59 -214.98

dividends and distributed profits from direct investment -34.72 -134.65 -123.83 -152.54 -122.04reinvested income and branches undistributed profit -98.70 11.56 -14.55 -94.42 9.84income from other investments*** -66.96 -62.39 -46.90 -58.49 -62.50

Current transfers 1638.80 1220.63 1326.92 1515.76 1605.10inflow, of which: 1750.29 1323.99 1416.32 1615.99 1710.41

personal transfers 1046.02 635.21 608.47 701.37 769.29outflow -111.49 -103.36 -89.40 -100.23 -105.31

CAPITAL AND FINANCIAL ACCOUNT 912.37 415.01 420.78 704.05 427.01Capital account -14.61 -17.54 -28.36 -29.72 -34.78Direct investment, of which: 695.38 138.57 193.90 260.45 139.43

in the national economy 711.46 145.33 197.41 281.02 159.21equity capital and reinvested earnings 540.40 150.00 171.53 238.32 135.79intra-group loans 171.06 -4.67 25.88 42.70 23.42

Portfolio investment, of which: 6.38 -5.82 5.64 4.74 16.51Assets* -0.04 -0.25 -0.20 -0.39 3.98

equity securities -0.03 -0.25 -0.20 -0.39 -0.26debt securities -0.01 - - - 4.24

Liabilities** 6.42 -5.57 5.84 5.13 12.53equity securities 11.36 2.39 5.84 5.07 12.53debt commitments -4.94 -7.96 - 0.06 -

Financial derivatives-banks (net) 0.94 0.34 -0.63 0.19 -0.24Other investment 676.29 98.91 544.60 746.50 803.72

Assets* 52.14 -210.56 75.46 91.06 156.36trade loans 76.30 44.86 21.24 -74.39 82.76loans 1.80 4.20 -7.39 1.99 -4.96currency and deposits -25.96 -259.62 61.61 163.46 78.56

Liabilities** 624.15 309.47 469.14 655.44 647.36trade loans 131.16 90.70 128.62 200.71 138.88long-term loans *** 378.26 -11.49 260.25 307.99 401.24

usage 701.05 306.47 628.45 726.20 814.10reimbursement -322.79 -317.96 -368.20 -418.21 -412.86

short-term loans 32.86 -46.02 23.79 16.67 25.15deposits of non-residents within the national banking system 53.12 -46.64 -69.59 47.69 -5.45other liabilities 28.75 138.72 126.07 82.38 87.54SDR allocation - 184.20 - - -

State reserve assets* -452.01 200.55 -294.37 -278.11 -497.63Errors and omissions 60.44 31.69 28.21 86.32 83.86

Foreign money transfers for individualsthrough banks from Moldova 1660.09 1182.02 1244.14 1443.47 1494.23

*(-) - increase, (+) - decrease; ** (+) - increase, (-) - decrease; ***data for 2008 include the rescheduled loansNote: Data for 2012 are provisionalSource: NBM


Table A.2: Dynamics of foreign trade in services

2008 2009 2010 2011 2012 2012 / 2011million, USD %

Services 6.83 -39.75 -63.51 -2.60 -21.08 by 8.1 timesCredit 843.90 673.11 700.31 881.47 936.32 106.2

Debit -837.07 -712.86 -763.82 -884.07 -957.40 108.3

Transport 32.12 -3.29 -40.10 -21.99 -18.37 83.5Credit 357.04 253.48 244.46 343.04 363.13 105.9

Debit -324.92 -256.77 -284.56 -365.03 -381.50 104.5

Travel -71.27 -70.52 -87.60 -104.79 -118.96 113.5Credit 216.42 172.52 172.71 194.96 212.52 109.0

Debit -287.69 -243.04 -260.31 -299.75 -331.48 110.6

Communication services 67.19 66.06 87.92 92.50 99.88 108.0Credit 114.56 105.21 126.05 134.96 140.04 103.8

Debit -47.37 -39.15 -38.13 -42.46 -40.16 94.6

Other services -21.21 -32.00 -23.73 31.68 16.37 51.7Credit 155.88 141.90 157.09 208.51 220.63 105.8

Debit -177.09 -173.90 -180.82 -176.83 -204.26 115.5Source: NBM

Table A.3: Income2008 2009 2010 2011 2012 2012 / 2011

million, USD %

Income 604.79 321.24 507.12 565.90 829.29 146.5Credit 906.22 592.06 767.16 927.49 1044.27 112.6Debit -301.43 -270.82 -260.04 -361.59 -214.98 59.5

Compensation for residents labor 763.00 497.12 683.61 863.22 978.45 113.3Credit 842.00 563.42 742.96 899.03 1005.99 111.9Debit -79.00 -66.30 -59.35 -35.81 -27.54 76.9

Income from direct and portfolio investments -137.98 -120.63 -133.02 -244.99 -102.69 41.9Credit 17.49 21.50 20.77 22.30 22.25 99.8Debit -155.47 -142.13 -153.79 -267.29 -124.94 46.7

Dividends and distributed profits -37.36 -133.70 -120.23 -149.89 -123.60 82.5Credit 1.06 2.14 6.25 6.30 6.31 100.2Debit -38.42 -135.84 -126.48 -156.19 -129.91 83.2

Reinvested income and undistributed profit -98.70 11.56 -14.55 -94.42 9.84 -Debit -98.70 11.56 -14.55 -94.42 9.84 -

Interest -1.92 1.51 1.76 -0.68 11.07 -Credit 16.43 19.36 14.52 16.00 15.94 99.6Debit -18.35 -17.85 -12.76 -16.68 -4.87 29.2

Income from other investment -20.23 -55.25 -43.47 -52.33 -46.47 88.8Credit 46.73 7.14 3.43 6.16 16.03 by 2.6 timesDebit -66.96 -62.39 -46.90 -58.49 -62.50 106.9

Source: NBM


Table A.4: Current transfers2008 2009 2010 2011 2012 2012 / 2011

million, USD %

Balance of current transfers 1638.80 1220.63 1326.92 1515.76 1605.10 105.9Credit 1750.29 1323.99 1416.32 1615.99 1710.41 105.8Debit -111.49 -103.36 -89.40 -100.23 -105.31 105.1

Grants and technical assistance 276.44 246.62 273.02 275.04 295.40 107.4Credit 277.71 247.56 274.35 277.17 297.23 107.2Debit -1.27 -0.94 -1.33 -2.13 -1.83 85.9

Education and staff training 35.40 28.47 42.02 52.86 59.12 111.8Credit 35.68 28.96 42.72 53.38 59.65 111.7Debit -0.28 -0.49 -0.70 -0.52 -0.53 101.9

Humanitarian aid 59.37 21.42 40.97 27.56 29.94 108.6Credit 59.41 21.43 40.99 27.56 29.94 108.6Debit -0.04 -0.01 -0.02 - - -

Fees in international organizations -5.82 -5.00 -4.94 -5.29 -6.75 127.6Credit 0.09 0.02 0.06 0.17 0.10 58.8Debit -5.91 -5.02 -5.00 -5.46 -6.85 125.5

Personal transfers 1032.77 627.24 589.23 685.98 755.85 110.2Credit 1046.02 635.21 608.47 701.37 769.29 109.7Debit -13.25 -7.97 -19.24 -15.39 -13.44 87.3

Other current transfers 240.64 301.88 386.62 479.61 471.54 98.3Credit 331.38 390.81 449.73 556.34 554.20 99.6Debit -90.74 -88.93 -63.11 -76.73 -82.66 107.7

Source: NBM

Table A.5: External assets and liabilities, net flows

2008 2009 2010 2011 2012

Financial account 926.98 432.55 449.14 733.77 461.79External assets* -416.05 -17.10 -223.25 -208.02 -357.31

Direct investment -16.08 -6.76 -3.51 -20.57 -19.78Portfolio investment -0.04 -0.25 -0.20 -0.39 3.98Financial derivatives -0.06 -0.08 -0.63 -0.01 -0.24Other investments 52.14 -210.56 75.46 91.06 156.36

trade loans 76.30 44.86 21.24 -74.39 82.76loans 1.80 4.20 -7.39 1.99 -4.96currency and deposits -25.96 -259.62 61.61 163.46 78.56

Reserve assets -452.01 200.55 -294.37 -278.11 -497.63

External liabilities 1343.03 449.65 672.39 941.79 819.10Direct investment 711.46 145.33 197.41 281.02 159.21Portfolio investment 6.42 -5.57 5.84 5.13 12.53Financial derivatives 1.00 0.42 - 0.20 -Other investments 624.15 309.47 469.14 655.44 647.36

trade loans 131.16 90.70 128.62 200.71 138.88loans 411.12 -57.51 284.04 324.66 426.39currency and deposits 53.12 -46.64 -69.59 47.69 -5.45other liabilities 28.75 138.72 126.07 82.38 87.54SDR allocations - 184.20 - - -

*(-) increaseSource: NBM

132A

nnualReport

(NB

M,

2012)

Table A.6: Direct investments in the national economy and abroad, flows (million, USD)

2008 2009 2010 2011 2012

inflow outflow inflow outflow inflow outflow inflow outflow inflow outflow

Direct investment 875.38 180.00 378.16 239.59 362.44 168.54 430.53 170.08 337.00 197.57In the national economy 868.28 156.82 374.77 229.44 362.35 164.94 430.49 149.47 336.59 177.38

equity capital* 481.21 39.51 209.53 47.97 186.33 29.35 187.24 43.34 204.58 58.95banking sector 30.06 - 25.45 - 34.03 - 7.64 - 12.21 18.60other sectors 451.15 39.51 184.08 47.97 152.30 29.35 179.60 43.34 192.37 40.35

reinvested earnings and undistributed profits 98.70 - -11.56 - 14.55 - 94.42 - -9.84 -banking sector 22.68 - -21.48 - -24.66 - 18.61 - 6.43 -other sectors 76.02 - 9.92 - 39.21 - 75.81 - -16.27 -

other capital (intra-group loans)** 288.37 117.31 176.80 181.47 161.47 135.59 148.83 106.13 141.85 118.43claims to foreign investors 7.69 22.84 10.28 0.10 2.71 6.80 7.27 20.48 0.03 9.83liabilities to foreign investors 280.68 94.47 166.52 181.37 158.76 128.79 141.56 85.65 141.82 108.60

Abroad 7.10 23.18 3.39 10.15 0.09 3.60 0.04 20.61 0.41 20.19

*including real estate purchases by non-resident individuals and legal entities**other capital includes only the loans of other sectors: loans of banks are included in "other investments"

Source: NBM

Chapter

A.Statisticaltables

133Table A.7: External loans (million, USD)

2008 2009 2010 2011 2012

received reimbursed received reimbursed received reimbursed received reimbursed received reimbursedLoans of the monetary authorities 37.56 25.43 - 14.86 61.34 8.41 135.37 6.16 154.64 16.13(NBM from IMF)Government loans 74.82 54.73 41.19 44.60 212.05 45.91 96.81 62.31 144.64 49.41

of which: rescheduled 31.52 21.74 - - - - - - - -Bank loans 227.60 61.56 100.00 154.98 156.98 123.12 223.34 132.14 305.91 278.58

long-term 173.01 53.61 98.00 106.79 154.21 120.35 200.79 127.64 133.19 115.98short-term 54.59 7.95 2.00 48.19 2.77 2.77 22.55 4.50 172.72 162.60

Loans of other sectors 473.61 260.75 188.37 172.63 230.29 199.18 315.45 245.70 422.78 257.46long-term 415.66 189.02 167.28 151.71 200.85 193.53 293.23 222.10 381.63 231.34short-term 57.95 71.73 21.09 20.92 29.44 5.65 22.22 23.60 41.15 26.12

TOTAL 813.59 402.47 329.56 387.07 660.66 376.62 770.97 446.31 1027.97 601.58TOTAL without the rescheduled loans 782.07 380.73 329.56 387.07 660.66 376.62 770.97 446.31 1027.97 601.58

Source: NBM


Table A.8: Gross external debt of the Republic of Moldova, at the end of period (million, USD)

2008 2009 2010 2011 2012

Governmental sector 778.26 957.50 1116.17 1142.48 1245.57long-term 778.26 957.50 1116.17 1142.48 1245.57Bonds and other debt securities 6.35 - - - -

Loans 771.91 773.63 934.89 962.33 1064.12

SDR allocations - 183.87 181.28 180.15 181.45

Monetary authorities 166.97 153.33 204.24 327.05 467.34long-term 166.97 153.33 204.24 327.05 467.34Loans 166.97 153.33 204.24 327.05 467.34

Banks 561.36 457.59 406.62 545.24 570.67short-term 283.13 189.98 113.18 183.97 188.84Loans 56.78 10.60 10.60 28.65 38.37

Currency and deposits 226.35 179.38 101.97 148.99 144.80

Other debt liabilities - - 0.61 6.33 5.67

long-term 278.23 267.61 293.44 361.27 381.83Loans 278.23 267.61 293.44 361.27 381.83

Other sectors 1784.69 1941.81 2184.81 2493.70 2865.81short-term 1052.71 1175.73 1432.86 1680.06 1893.01Loans 16.87 17.00 40.77 38.93 54.76

Trade loans 622.95 714.20 834.67 1017.13 1155.47

Other debt liabilities 412.89 444.53 557.42 624.00 682.78

Arrears 50.88 70.72 124.58 168.93 175.49

Other 362.01 373.81 432.84 455.07 507.29

of which the debt for energy 360.39 372.19 419.64 453.45 505.67

long-term 731.98 766.08 751.95 813.64 972.80Loans 731.98 766.08 751.95 813.64 972.80

Direct investment: intra-group 788.18 848.68 874.50 934.14 982.62Commitments to foreign investors 788.18 848.68 874.50 934.14 982.62

Arrears 62.20 147.59 160.58 170.44 179.80

Loans from foreign investors 725.98 701.09 713.92 763.70 802.82

TOTAL 4079.46 4358.91 4786.34 5442.61 6132.01Source: NBM


Table A.9: Public external debt, publicly guaranteed and private non-guaranteed debt (million, USD)

2008 2009 2010 2011 2012

Public and publicly guaranteed debt 957.46 1139.79 1348.67 1521.35 1762.56Short-term 0.15 0.10 0.03 - -Other debt liabilities 0.15 0.10 0.03 - -

Arrears (principal and interest) 0.15 0.10 0.03 - -

of which: public corporate debt 0.15 0.10 0.03 - -

Long-term 957.31 1139.69 1348.64 1521.35 1762.56Bonds and other debt securities 6.35 - - - -

Loans 950.96 955.82 1167.36 1341.20 1581.11

of which: public corporate debt 12.08 28.86 28.23 51.82 49.66

SDR allocation from IMF - 183.87 181.28 180.15 181.45

Private non-guaranteed debt 3122.00 3219.12 3437.67 3921.26 4369.45Short-term 1335.69 1365.61 1546.01 1864.03 2081.85Loans 73.65 27.60 51.37 67.58 93.13

Currency and deposits 226.35 179.38 101.97 148.99 144.80

Trade loans 622.95 714.20 834.67 1017.13 1155.47

Other debt liabilities 412.74 444.43 558.00 630.33 688.45

Arrears (principal and interest) 50.73 70.62 124.55 168.93 175.49

Other 362.01 373.81 433.45 461.40 512.96

Long-term 998.13 1004.83 1017.16 1123.09 1304.98Loans 998.13 1004.83 1017.16 1123.09 1304.98

Direct investment: intra-group lending 788.18 848.68 874.50 934.14 982.62Commitments to foreign investors 788.18 848.68 874.50 934.14 982.62

Arrears 62.20 147.59 160.58 170.44 179.80

Loans from foreign investors 725.98 701.09 713.92 763.70 802.82

TOTAL 4079.46 4358.91 4786.34 5442.61 6132.01Source: NBM


Table A.10: Foreign loans and SDR allocations, at the end of period, specification of creditors (million, USD)

2008 2009 2010 2011 2012

Monetary authorities 166.97 153.33 204.24 327.05 467.34IMF 166.97 153.33 204.24 327.05 467.34

Direct state debt 762.73 944.20 1106.09 1134.85 1239.92International organisations 480.21 688.36 855.53 920.06 1039.32

IBRD, IDA 436.40 441.16 479.41 508.16 562.93

EBRD 2.43 1.46 0.49 3.49 14.41

IFAD 31.65 37.18 42.31 45.42 54.24

CEB 8.79 12.91 12.34 13.30 17.82

EIB 0.94 11.78 16.49 24.15 62.03

IMF - 183.87 304.49 325.54 327.89

Bilateral creditors 276.17 255.84 250.56 214.79 200.60USA 56.41 53.82 51.24 48.65 46.07

Japan 26.89 23.50 23.40 21.23 16.25

Russian Federation 133.51 121.30 109.09 96.89 84.68

Poland - - 15.00 - -

Austria - - - - 9.04

other 59.36 57.22 51.83 48.02 44.56

Debt securities 6.35 - - - -Guaranteed debt assumed by state 15.53 13.30 10.08 7.63 5.64

Other creditors 15.53 13.30 10.08 7.63 5.64Public corporate debt* 12.23 28.96 28.26 51.82 49.66

International organisations 11.30 17.88 15.11 32.60 31.01EBRD 11.30 17.74 14.98 19.58 18.05

EIB - 0.14 0.13 8.02 8.27

IFC - - - 5.00 4.69

Other creditors 0.93 11.08 13.15 19.22 18.65Private debt non-guaranteed by the state 1910.69 1951.73 2067.58 2293.74 2556.22

International organisations 161.56 142.77 219.27 302.30 342.82Other creditors 1749.13 1808.96 1848.31 1991.44 2213.40

TOTAL 2868.15 3091.52 3416.25 3815.09 4318.78

*including state guaranteedSource: NBM


Table A.11: The evolution of credit indebtedness of the banks to the NBM in 2012 (million, MDL)

Purpose of credits Balance of Credits granted Credits paid-off Balance of31.12.2011 in 2012 in 2012 31.12.2012

Credits granted for

maintenance of liquidity 7.5 14.0 21.5 0

Credits granted for the protection of

the integrity of the banking system 372.6 0 93.2 279.4

Credits granted for lending the

cooperative housing construction 13.9 0 3.2 10.7

Total 394.0 14.0 117.9 290.1Source: NBM

Table A.12: Total turnover of the domestic foreign exchange market operations (purchases/sales of the foreigncurrency against MDL) (equivalent in million USD)

Domestic foreign exchange transfer market Domestic foreign exchange cash market Domestic foreignNBM Resident Non-resident Legal Miscellaneous Total Banks’ exchange Exchange Total exchange market

banks banks entities offices offices

Equivalent in millions USD2011 109.2 670.1 17.6 6507.7 984.1 8288.7 3127.2 841.1 3968.3 12257.02012 350.1 1947.0 39.3 6416.2 1395.0 10147.6 3278.9 910.3 4189.2 14336.8

Share, %2011 0.9 5.5 0.1 53.1 8.0 67.6 25.5 6.9 32.4 1002012 2.4 13.6 0.3 44.8 9.7 70.8 22.9 6.3 29.2 100

Growth rate compared to the previous year, %2012 3.2 times 2.9 times 2.2 times -1.4 41.8 22.4 4.9 8.2 5.6 17.0

Source: Reports on purchases and sales operations of foreign currency made by licensed banks and the NBM data; Report on foreign exchangeoperations conducted by the foreign exchange office. Report on foreign exchange operations conducted by foreign exchange points near hotels.

Table A.13: Structure of turnover of foreign exchange transactions on the domestic foreign exchange market

Foreign exchange Foreign exchange Total foreign In total

transfer market cash market exchange market turnover

purchases sales purchases sales purchases sales

2011 Share, %

USD 57.5 65.2 33.6 31.9 44.5 60.4 52.5

EUR 38.4 32.1 57.1 59.9 48.6 36.1 42.3

RUB 4.0 2.5 8.5 4.9 6.5 2.9 4.6

Other currencies 0.1 0.2 0.8 3.3 0.4 0.6 0.6

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0

2012 Share, %

USD 55.2 63.1 31.9 31.5 43.7 59.2 51.4EUR 41.3 34.7 53.3 56.5 47.3 37.4 42.3RUB 3.4 2.0 13.9 8.2 8.5 2.8 5.7Other currencies 0.1 0.2 0.9 3.8 0.5 0.6 0.6Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Source: NBM


Table A.14: The main sources of foreign currency purchases by the licensed banks from Moldova in thedomestic foreign exchange market (the equivalent in millions USD)

Foreign currency purchases on the domestic foreign exchange market against MDL from:

NBM Resident Non-resident Legal Exchange Individuals Various Total

banks banks entities offices

Equivalent in millions, USD

2011 31.5 337.5 8.0 1981.9 2.7 2920.0 395.7 5677.2

2012 20.0 970.3 5.5 1952.2 2.1 3196.0 553.7 6699.8Share, %

2011 0.6 5.9 0.1 34.9 0.1 51.4 7.0 100.0

2012 0.3 14.5 0.1 29.1 0.0 47.7 8.3 100.0Growth rate, compared to the previous year, %

2012 -36.5 2.9 times -31.3 -1.5 -21.2 9.5 40.0 18.0

Source: Reports on purchases and sales operations of foreign currency made by licensed banks and the NBM data.

Table A.15: The main selling directions of foreign currency by licensed banks of the Republic of Moldova onthe domestic foreign exchange market (equivalent in million, USD)

Foreign currency sales against MDL on the domestic foreign exchange market




2011 77.7 332.6 9.6 4525.8 0.0 528.2 264.7 5738.6

2012 330.1 976.7 33.8 4463.9 0.0 498.4 423.8 6726.7Share, %

2011 1.3 5.8 0.2 78.9 0.0 9.2 4.6 100.0

2012 4.9 14.5 0.5 66.4 0.0 7.4 6.3 100.0Growth rate, compared to the previous year, %

2012 4.2 times 2.9 times 3.5 times -1.4 0.0 -5.6 60.1 times 17.2

Source: Reports on purchases and sales operations of foreign currency made by licensed banks and the NBM data.


Table A.16: Net balance of purchases/sales operations of foreign currency against MDL (equivalent in million,USD)

Net balance




I quarter 3.5 0.0 0.8 -555.6 0.5 514.8 18.0 -17.8

II quarter -14.2 0.6 -0.3 -657.0 0.9 624.1 29.4 -16.4

III quarter -9.6 -1.0 -3.2 -695.8 0.8 659.9 37.1 -11.8

IV quarter -25.9 5.3 1.1 -635.6 0.5 592.9 46.4 -15.3

2011 -46.2 4.9 -1.5 -2543.9 2.7 2391.8 131.0 -61.4I quarter 0.0 0.2 1.3 -609.9 0.6 561.4 24.8 -21.6

II quarter -21.3 -8.0 -14.0 -638.3 0.6 644.7 30.9 -5.5

III quarter -220.9 0.4 -12.5 -629.2 0.8 837.5 40.4 16.5

IV quarter -67.9 1.0 -3.0 -634.3 0.1 654.0 33.8 -16.3

2012 -310.1 -6.4 -28.3 -2511.7 2.1 2697.6 129.9 -26.9

Source: NBM

Table A.17: Balance sheet assets in foreign currency of banks (equivalent in million USD)

Balance as of Share Balance as of Share Change against

31.12.2011 in total, % 31.12.2012 in total, % 31.12.2011, %

Granted loans 1143.7 65.4 1240.2 62.8 8.4

Disposable funds

in foreign currency 300.1 17.1 392.8 19.9 30.9

Required reserves


Other assets


Foreign currency-linked

assets 101.1 5.8 103.1 5.2 2.0

Total of balance sheet assetsin foreign currency 1748.9 100.0 1974.6 100.0 12.9

Source: NBM

Table A.18: Loans in foreign currency granted by banks (equivalent in million USD)


31.12.2011 in total, % 31.12.2012 in total, % 31.12.2011, %

EUR 631.6 55.2 715.6 57.7 13.3

USD 512.1 44.8 524.6 42.3 2.4

Total 1143.7 100.0 1240.2 100.0 8.4Source: NBM


Table A.19: Disposable funds in foreign currency of the licensed banks (equivalent in million, USD)


31.12.2011 in total, % 31.12.2012 in total, % 31.12.2011, %

„Nostro” accounts

opened abroad 158.0 52.7 194.5 49.5 23.1

Cash 72.8 24.3 96.2 24.5 32.1

Placements and

overnight credits 43.6 14.5 62.0 15.8 42.2

Placements abroad of

licensed banks 16.0 5.3 37.6 9.6 2.4 times

State securities 9.7 3.2 2.5 0.6 -74.2

Total 300.1 100.0 392.8 100.0 30.9Source: NBM

Table A.20: Disposable funds in foreign currency of banks, by types of currency (equivalent in million USD)


31.12.2011 in total, % 31.12.2012 in total, % 31.12.2011, %

EUR 153.5 51.1 201.2 51.2 31.1

USD 130.2 43.4 156.5 39.8 20.2

RUB 10.4 3.5 30.8 7.9 3.0 times

Other currencies 6.0 2.0 4.3 1.1 -28.3

Total 300.1 100.0 392.8 100.0 30.9Source: NBM

Table A.21: Balance sheet liabilities in foreign currency of banks (equivalent in million USD)


31.12.2011 in total, % 31.12.2012 in total, % 31.12.2011, %

Clients term deposits 769.0 45.1 885.6 45.5 15.2

Clients current accounts - - 271.8 14.0 -

Clients various deposits 404.1 23.7 186.9 9.6 -53.7

Received loans 389.8 22.9 476.9 24.5 22.3

Term deposits of banks

from abroad 103.5 6.0 50.5 2.6 -51.2

“LORO” accounts of banks

from abroad 1.0 0.1 0.4 0.0 -60.0

Other liabilities in foreign currency 37.4 2.2 75.0 3.8 2.0 times

Total 1704.8 100.0 1947.1 100.0 14.2Source: NBM


Table A.22: Total deposits in foreign currency of bank’s clients (equivalent in millions, USD)


31.12.2011 in total, % 31.12.2012 in total, % 31.12.2011, %

EUR 817.8 69.7 888.7 66.1 8.7

USD 344.6 29.4 436.5 32.5 26.7

RUB 5.8 0.5 16.5 1.2 2.8 times

Other currencies 4.9 0.4 2.7 0.2 -44.9

Total 1173.1 100.0 1344.4 100.0 14.6Source: NBM

Table A.23: Conditional assets and liabilities of licensed banks in foreign currency (equivalent in million, USD)Balance as of Share Balance as of Share Change against31.12.2011 in total, % 31.12.2012 in total, % 31.12.2011, %

Conditional assets in foreign currencyCurrent purchases 217.8 82.9 404.1 98.2 85.5Purchases on term 40.4 15.4 4.0 1.0 -90.1Other conditional assets 4.5 1.7 3.4 0.8 -24.4Total conditional assets 262.7 100.0 411.5 100.0 56.6

Conditional liabilities in foreign currencyCurrent sales 217.6 78.9 413.0 98.9 89.8Sales on term 58.1 21.1 4.1 1.0 -93.0Other conditional liabilities 0.0 0.0 0.4 0.1 -Total conditional liabilities 275.7 100.0 417.5 100.0 51.4Total Regulatory Capital (TRC) 638.9 566.4(Conditional assets – Conditional liabilities)/TRC (%) -2.0 -1.1

Source: NBM

Table A.24: Limits on investment and constraints imposed by the NBM in the investment risk managementRisks Methods of reducing risks

Credit risk *Investing in secure counterparties with high credit quality, set by international rating agencies: Standard&Poor’s, Moody’s andFitch IBCA (the minimum rating quoted by the three agencies shall be used).*Establishing a minimum acceptable rating of counterparties authorized to conduct transactions.*Establishing limits on countries, sectors, and investment instruments, counterparties/individual issuers, limits in termsof investment term.*Daily monitoring of investment limits and compliance with credit limits.*Credit risk quantification, using default coefficients determined by the Standard&Poor’s rating agency for each type of ratingand maturity.

Foreign exchange risk *Establishing by the Council of Administration of the NBM a normative foreign exchange structure of the investment portfolio,covering the currency risk through a proper correspondence of foreign exchange composition of assets and liabilities,and through an acceptable investment horizon to service current external commitments and the implementation ofthe foreign exchange policy of the state.*The normative foreign exchange structure is determined based on a comprehensive analysis of the structure of imports,foreign debt, foreign exchange market turnover, structure of deposits in foreign currency, etc.*Application of a policy to diversify the investment portfolio taking into account the SDR basket structure that is exposed to a lowerrisk of exchange rate fluctuations.*Establishing by the NBM’s Investment Committee a foreign exchange strategic structure of the investment portfolio within the limitsnot exceeding +/- 5% of the normative foreign exchange structure.*Compliance with the normative foreign exchange structure and the foreign exchange strategic structure of the investment portfolio.

Liquidity risk *Ensuring liquidity through on sight deposits and by investing in securities with high liquidity and low risk.*Limiting the weighted average duration of the investment portfolio and monitoring its progress against benchmarks in dynamics(deflection allowed shall not exceed +/- 20% of the normative average duration).

Source: NBM

142A

nnualReport

(NB

M,

2012)

Table A.25: Dynamics of the structure of assets in the banking sector of the Republic of Moldova (%)

Indicator 02.01.2012 31.12.2012 Dynamics 31.12.2012/02.01.2012

million, MDL share in total million, MDL share in total million, MDL +/- (%)

assets (%) assets (%)

Cash and cash equivalents 11003.1 22.3 14368.7 24.6 3365.6 30.6

Financial assets held-for-trading 121.7 0.2 185.2 0.3 63.5 52.2

Financial assets designated as atfair value through profit or loss 1.2 0.0 0.0 0.0 -1.2 -100.0

Financial assets available for sale 236.8 0.5 336.7 0.6 99.9 42.2

Loans and claims 31576.4 64.1 36341.8 62.3 4765.4 15.1

Investments held to maturity 2968.0 6.0 3404.8 5.9 436.8 14.7

Tangible assets 1570.6 3.2 1695.4 2.9 124.8 7.9

Intangible assets 251.2 0.5 244.4 0.4 -6.8 -2.7

Claims on taxes 60.3 0.1 113.3 0.2 53.0 87.9

Other assets 732.1 1.5 882.8 1.5 150.7 20.6

Non-current assets and disposalgroups classified as held for sale 760.6 1.6 731.3 1.3 -29.3 -3.9

TOTAL ASSETS 49282.0 100.0 58304.4 100.0 9022.4 18.3Source: NBM


Table A.26: The structure of the loan portfolio of licensed banks in the Republic of Moldova by industry

As of 31.12.2012million, MDL share in total

loans (%)

Loans granted to commerce 12843.0 36.7

Loans granted to food industry 3705.8 10.6

Loans granted to productive industry 2919.4 8.3

Other loans 2651.2 7.6

Loans granted to agriculture 2159.2 6.2

Consumer loans 2039.2 5.8

Loans granted to transport, telecommunications and network development 1837.3 5.3

Loans granted to constructions sector 1526.0 4.4

Loans granted to energy industry 1475.4 4.2

Loans granted to the purchase/construction of building 1460.1 4.2

Loans granted to individuals performing an activity 1271.3 3.6

Loans granted to non-bank financial environment 851.6 2.4

Loans granted to non-profit organizations 132.5 0.4

Loans granted to banks 53.8 0.2

Loans granted to territorial-administrative units 48.0 0.1

Loans granted to National House of Social Insurance 8.0 0.0

Loans granted to institutions financed from the state budget 0.6 0.0

Total 34982.3 100Source: NBM


Table A.27: Dynamics of liabilities structure of the banking sector of the Republic of MoldovaName 31.12.2012 02.01.2012 Dynamics

Carrying Share Carrying Share million, MDL %amount (%) amount (%)

(million, MDL) (million, MDL)Financial liabilities heldfor trading 0.0 0.0 0.9 0.0 -0.9 -100Financial liabilitiesdesignated as at fair valuethrough profit or loss 0.0 0.0 0.0 0.0 0.0 -Financial liabilities measured at amortized cost: 47343.5 98.5 39055.4 98.5 8288.1 21.2including clients deposits 39916.0 83.1 32744.9 82.6 7171.1 21.9Provisions 75.4 0.2 52.9 0.1 22.5 42.6Debts on taxes 352.0 0.7 183.2 0.5 168.8 92.1Other debts 287.6 0.6 351.9 0.9 -64.3 -18.3

TOTAL DEBTS 48058.4 100 39644.3 100 8414.1 21.2Source: NBM

Table A.28: Commemorative coins issued in 2012Name Face value Metal Weight Diameter (mm) Mintage

(grams) (pieces)

Series Personalities555 years of the enthronement of Stefan cel Mare si Sfânt MDL 100 Gold 999.9/1000 15.5 28 1000

MDL 50 Silver 999/1000 13.0 28 2000Andrei Lupan – 100 years since birth MDL 50 Silver 999/1000 13.0 28 500

Seria Alley of Classics from the Stefan cel Mare si Sfînt Public Garden in ChisinauIon Creanga MDL 100 Gold 999.9/1000 7.8 24 1000

MDL 50 Silver 999/1000 13.0 28 2000

Series Holidays, culture, traditions of MoldovaiMiorita - 160 years since the publication of the ballad MDL 50 Silver 999/1000 16.5 30 2000Sânzienele MDL 50 Silver 999/1000 16.5 30 2000

Series SanctuariesMazarache Church from Chisinau MDL 50 Silver 999/1000 16.5 30 1000

Series Monasteries of MoldovaMonastery of Butuceni MDL 50 Silver 999/1000 16.5 30 2000

Series Monuments of MoldovaSoroca Fortress MDL 50 Silver 999/1000 16.5 30 2000

Series Red Book of Republic of MoldovaOtter MDL 50 Silver 999/1000 16.5 30 1000Lady’s slipper orchid MDL 50 Silver 999/1000 16.5 30 1000

Series SportsThe 2012 Summer Olympic Games MDL 50 Silver 999/1000 16.5 30 1000

Source: NBM

Table A.29: IMF financial arrangements

Amount approved Amount disbursed Share of disbursements Stock as of Stock as ofFacility until 31.12.2012 until 31.12.2012 in the total amount approved 31.12.2012 31.12.2012

(million, SDRs) (million, SDRs) (%) (million, SDRs) (million, USD)

Extended Fund Facility (EFF) 319.80 236.62 73.99 149.12 229.87Extended Credit Facility (ECF) 311.56 191.58 61.48 154.05 237.47

Source: NBM


Table A.30: Analysis of profit available for distribution in conjunction with the main activities of the NBM2012 2011

Financial result Financial result Difference Absolute difference2012/2011

thousands, MDL thousands, MDL % thousands, MDLActivities managed by the bank:Monetary and credit operations (116044) (146582) (20.83) 30538Foreign exchange reserves management 412279 277745 48.44 134534National currency issuance 16 4692 (99.66) (4676)Other operations, includingoperating costs (69153) (64935) 6.5 (4218)

Profit available for distribution 227098 70920 220.22 156178Source: NBM

Table A.31: Net result from the monetary policy implementation2012 2011 Difference Absolute difference

2012/2011thousands, MDL thousands, MDL % thousands, MDL

Standing facilities (5197) (13426) (61.29) 8229Required reserves (37793) (67430) (43.95) 29637Accounts and deposits of the Ministry of Finance (17709) (25747) (31.22) 8038Open market operations (193169) (274857) (29.72) 81688Lending activity and placement in state securities 137824 234878 (41.32) (97054)

Net result (116044) (146582) (20.83) 30538Source: NBM

Table A.32: Net result from the management of foreign exchange reserves held by the NBM2012 2011 Difference Absolute difference

2012/2011thousands, MDL thousands, MDL % thousands, MDL

Securities in foreign currency 264516 206816 27.9 57700Deposits 36598 42402 (13.69) (5804)IMF loans (24505) (15651) 56.57 (8854)Differences from foreign exchange rate 145603 50495 188.35 95108Commissions and fees (9933) (6317) 57.24 (3616)

Net result 412279 277745 48.44 134534Source: NBM

Table A.33: Evolution of the official exchange rate

2012 2011average on at the end average on at the end

period of the year period of the year

USD/MDL 12.1122 12.0634 11.7370 11.7154

EUR/MDL 15.5632 15.9967 16.3369 15.0737

GBP/MDL 19.1917 19.5150 18.8210 18.0123

CHF/MDL 12.9115 13.2398 13.2747 12.3861

SDRs/MDL 18.5459 18.5955 18.5268 17.9292

XAU/MDL 649.0238 641.9843 636.8011* 579.1130* Average exchange rate for gold has been calculated based on daily exchange rates for the period of 15 November 2011 – 31 December 2011.

Source: NBM


Table A.34: Share of significant balance sheet items (%) and the annual average rates related to the financialinstruments (%)

2012 2011Share Annual Share Annual

% average % average

interest rate, % interest rate, %

ASSETS 100.00 - 100.00 -

Foreign assets 93.09 1.34 90.38 1.29

State securities 5.92 6.56 8.04 9.73

Loans granted (short/medium term) 0.87 10.80/0.01 1.46 12.6/2.42

Other assets 0.12 - 0.12 -

LIABILITIES 100.00 - 100.00 -

National currency in circulation 41.53 - 43.03 -

Available funds of the Government, including: 5.41 - 7.03 -

on sight, lei 5.41 2.05 6.12 0.81

on term, lei - - 0.14 9.05

on sight, FCC 0.27 - 0.77 -

Available funds of the banks, including: 17.05 - 18.40 -

LORO accounts, including: 8.78 - 8.34 -

required reserves in MDL , paid - 2.03 - 5.67

Required reserves in FCC, paid 6.52 0.28 7.39 0.12

Overnight deposits 1.75 2.26 2.67 6.50

Certificates of the NBM (placed) 10.68 5.05 10.41 8.54

Loans received from the IMF (EFF and ECF) 16.09 1.11 13.73 1.40

Other liabilities 7.01 - 8.19 -

Capital and reserves 2.23 - (0.79) -Source: NBM

Table A.35: Capital and reserves

31 December 2012 31 December 2011thousands, MDL thousands, MDL

Authorized capital 330017 288923

General reserve fund (596400) (709949)

Total statutory capital (266383) (421026)Reserve of unrealized gains from exchange rate differences

from the revaluation of foreign exchange stocks 743974 29155

Reserve of unrealized gains from the

revaluation of investment securities 300911 169720

Other reserves 2168 1898

Total capital and reserves 780670 (220253)Source: NBM


Table A.36: Monetary policy decisionsDate of adoption by the Council Decision

of Administration of the NBM

26.01.2012 - Base rate (on short term) decreased from 8.5 to 6.5 percent annually;- Rate on overnight loans decreased from 11.5 to 9.5 percent annually;- Rate on overnight deposits decreased from 5.5 to 3.5 percent annually.

23.02.2012 - Base rate (on short term) decreased from 6.5 to 4.5 percent annually;- Rate on overnight loans decreased from 9.5 to 7.5 percent annually;- Rate on overnight deposits decreased from 3.5 to 1.5 percent annually.

29.03.201226.04.201228.05.201228.06.2012 - Base rate (on short term) was maintained at the level of 4.5 percent annually;26.07.2012 - Rate on overnight loans was maintained at the level of 7.5 percent annually;30.08.2012 - Rate on overnight deposits was maintained at the level of 1.5 percent annually.27.09.201225.10.201229.11.201227.12.2012

Source: NBM

Table A.37: Monetary indicators (million, lei, at the end of period)

2009 2010 2011 2012

Monetary AggregatesMonetary base 10456.3 12115.1 14345.2 17633.5M0 (money in circulation) 8849.0 10107.6 10864.5 13240.8Sight deposits 4357.8 5612.6 6521.1 7366.5M1 13206.8 15720.2 17385.6 20607.3Term deposits 7733.9 9049.3 10879.3 14307.2Monetary market instruments 1.3 1.3 0.5 0.1M2 20942.0 24770.7 28265.4 34914.6Deposits in foreign currency 11742.3 12280.5 12711.7 14598.6M3 32684.4 37051.2 40977.1 49513.2Velocity of money in circulation (M2) 3.23 2.9 2.9 2.8Money multiplier (M2) 2.0 1.9 2.0 1.8Deposits (total) 23834.1 26942.4 30112.1 36272.3Deposits of legal entities 7224.2 8477.4 8835.0 11015.0

including in foreign currency 2852.0 2816.0 2886.0 3509.5Deposits of individuals 16609.9 18465.0 21277.1 25257.4

including in foreign currency 8890.3 9464.4 9825.8 11089.1

Payment requests of the NBM to banks 1865.4 979.4 394.1 290.1Payment requests to the non-governmental sector, total 23884.1 26915.5 30963.0 35948.3in national currency: 13202.3 15528.8 17174.5 20624.1

– to state enterprises 229.9 395.9 520.8 731.2– to private sector 8302.3 9573.2 10731.3 14268.0– to individuals 3720.0 4271.6 4779.26 5171.8– to other financial institutions 950.1 1288.1 1143.2 453.1

in foreign currency 10681.8 11386.6 13788.5 15324.2Source: NBM


Table A.38: Average weighted rate on term deposits

New attracted deposits

Total in MDL in foreign currency

volume interest rate volume interest rate

million, MDL % million, MDL %

2011Jan. 3 406.4 2 069.7 6.79 1 336.7 3.41

Feb. 2 952.2 1 555.9 7.82 1 396.3 3.43

Mar. 2 815.2 1 465.4 7.88 1 349.8 3.38

Apr. 2 949.4 1 595.5 7.23 1 353.9 3.64

May 3 392.3 1 908.3 7.83 1 484.0 3.38

Jun. 3 225.0 1 895.8 7.28 1 329.2 3.58

Jul. 3 184.4 1 889.6 7.75 1 294.8 3.54

Aug. 3 461.8 1 779.9 8.00 1 681.9 3.87

Sep. 4 685.0 2 940.7 6.87 1 744.3 3.94

Oct. 3 518.7 2 172.7 7.60 1 346.0 4.14

Nov. 3 322.4 2 061.9 7.37 1 260.5 4.07

Dec. 3 537.6 2 264.6 8.45 1 273.0 3.83

Total 2011 40 450.4 23 600.0 7.54* 16 850.4 3.69*

2012Jan. 4 026.3 2 431.0 7.06 1 595.3 4.03

Feb. 3 377.7 2 085.7 8.04 1 292.0 4.20

Mar. 3 212.1 1 941.3 7.32 1 270.8 4.20

Apr. 2 977.2 1 698.1 7.23 1 279.1 3.92

May 3 567.8 1 974.1 7.50 1 593.7 3.92

Jun. 3 022.1 1 663.5 7.59 1 358.6 3.79

Jul. 2 818.9 1 540.5 7.40 1 278.4 4.19

Aug. 3 655.1 1 898.4 7.15 1 756.7 4.53

Sep. 3 169.1 1 662.3 7.94 1 506.8 4.97

Oct. 3 222.1 1 727.6 7.72 1 494.5 4.50

Nov. 3 083.8 1 808.8 7.96 1 275.0 4.62

Dec. 2 795.1 1 676.9 8.44 1 118.2 4.68

Total 2012 38 927.3 22 108.2 7.59* 16 819.1 4.30*

*Weighted average per periodSource: NBM


Table A.39: Average weighted rate on loans

New attracted deposits

Total in MDL in foreign currency

volume interest rate volume interest rate

million, MDL % million, MDL %

2011Jan. 1 296.6 599.5 15.24 697.1 9.31

Feb. 1 858.9 909.4 14.53 949.5 9.25

Mar. 2 845.1 1 419.1 14.60 1 426.0 9.09

Apr. 2 244.2 1 281.7 15.05 962.5 8.67

May 2 233.5 1 223.9 14.59 1 009.6 8.96

Jun. 2 817.1 1 368.0 14.20 1 449.1 8.90

Jul. 2 195.6 1 205.4 14.32 990.2 9.23

Aug. 2 282.3 1 352.1 14.06 930.2 8.88

Sep. 2 663.5 1 607.1 14.11 1 056.4 8.86

Oct. 2 160.9 1 094.1 14.03 1 066.8 8.84

Nov. 2 263.8 1 339.4 14.57 924.4 8.79

Dec. 4 746.6 2 379.5 13.96 2 367.1 7.67

Total 2011 29 608.1 15 779.2 14.37* 13 828.9 8.75*Jan. 1 515.7 907.7 14.71 608.0 8.36

Feb. 2 291.0 1 288.7 13.90 1 002.3 9.86

Mar. 2 537.8 1 684.5 14.05 853.3 9.36

Apr. 2 219.7 1 396.1 14.25 823.6 8.60

May 1 996.3 1 277.5 13.98 718.8 8.09

Jun. 2 488.8 1 469.4 13.69 1 019.4 7.92

Jul. 2 366.4 1 304.0 13.37 1 062.4 7.74

Aug. 2 152.0 1 324.7 12.82 827.3 7.64

Sep. 2 151.1 1 353.4 12.58 797.7 7.78

Oct. 1 934.9 1 217.7 13.00 717.2 7.64

Nov. 1 920.1 1 193.8 12.68 726.3 7.73

Dec. 3 120.2 2 123.9 11.98 996.3 8.32

Total 2012 26 694.0 16 541.4 13.34* 10 152.6 8.28*

*Average per periodSource: NBM


Table A.40: Profit rate of issued on the primary market(%)

The monthly weighted average rate The monthlyby types of SS nominal weighted

91 days 182 days 364 days average rate

2011Jan. 8.11 9.10 9.60 8.48Feb. 9.67 10.98 11.29 10.55Mar. 10.69 12.07 12.35 11.59Apr. 10.53 12.05 12.66 11.56May 10.20 11.73 12.22 11.27Jun. 10.06 11.55 11.87 11.08Jul. 10.05 11.57 11.72 11.05Aug. 10.82 12.35 12.41 11.79Sep. 11.22 13.48 13.47 12.64Oct. 11.17 13.28 13.43 12.68Nov. 11.15 12.94 13.12 12.32Dec. 10.80 12.34 12.25 11.72

The monthly weightedaverage rate – 2011 10.42 12.05 12.28 11.42

2012Jan. 9.76 11.36 11.61 10.83Feb. 7.03 7.97 8.43 7.75Mar. 4.94 6.25 6.54 5.83Apr. 4.69 6.24 6.60 5.79May 4.65 6.01 6.70 5.67Jun. 4.71 5.65 6.56 5.52Jul. 5.61 6.14 7.33 6.19Aug. 5.46 5.79 7.26 5.99Sep. 4.92 5.25 6.72 5.46Oct. 4.44 4.71 6.01 5.00Nov. 4.51 4.75 5.82 4.98Dec. 4.55 4.86 5.85 5.04

The monthly weightedaverage rate – 2012 5.41 6.16 6.92 6.09

Source: NBM

Table A.41: Official exchange rate (MDL)2010 2011 2012

at the end of average per at the end of average per at the end of average perperiod period period period period period

USD (1) 12.1539 12.3663 11.7154 11.7370 12.0634 12.1122EUR (1) 16.1045 16.3995 15.0737 16.3369 15.9967 15.5632RUB (1) 0.3978 0.4072 0.3635 0.3999 0.3957 0.3899RON (1) 3.7544 3.8968 3.5032 3.8565 3.6061 3.4924

Source: NBM


Table A.42: List of decions of the Council of Administration of the National Bank of Moldova submitted forpublication in the Official Monitor of the Republic of Moldova in I semester 2012

No DCA Date of approval Title of Published in the Official Monitorno. of the DCA the DCA of the Republic of Moldova

number/article date1 3 05.01.2012 On the amendment and completion of the Instruction on FINREP 7-12/50 13.01.2012

financial situations at individual level, applicable to banks2 15 26.01.2012 On the NBM interest rates and on the required reserves ratio 25-28/141 03.02.20123 17 26.01.2012 On the NBM base rate on long-term loans 25-28/142 03.02.20124 29 15.02.2012 On the withdrawal of the license of C.B. "Universalbank" S.A. to 34-37/216 17.02.2012

conduct financial activities and on the initiation of forced liquidation5 38 23.02.2012 On the NBM interest rates and required reserves ratio 42-45/265 02.03.20126 61 29.03.2012 On the NBM interest rates and required reserves ratio 64/344 03.04.20127 91 12.04.2012 On the amendment and completion of the Regulation no. 23/09-01 99-102/650 25.05.2012

on licensing of banks8 102 26.04.2012 On the NBM interest rates and required reserves ratio 85-87/549 04.05.20129 103 26.04.2012 On the NBM base rate on long-term loans 85-87/550 04.05.201210 112 03.05.2012 On the amendment of the DCA of the NBM no.207 of August 15, 2007 119/696 08.06.2012

“On some peculiarities of financial institutions activity related to theprocess of capital legalization and transfer/export from the Republic ofMoldova of legalized funds by individuals”

11 120 24.05.2012 On the amendment of the Regulation on CHIBOR and CHIBID 104-108/674 01.06.2012reference rates

12 125 28.05.2012 On the NBM interest rates and required reserves ratio 104-108/675 01.06.201213 131 13.06.2012 On putting into circulation some commemorative coins as legal tender 120-125/759 15.06.2012

and for numismatic purposes14 134 14.06.2012 On the repeal of the DCA of the NBM no.49 of March 11, 2010 “On the 130/777 26.06.2012

approval of the Regulation on the procedure for issuance by the NationalBank of Moldova of the permit for sale of goods against freelyconvertible foreign currency in duty-free shops”

15 141 21.06.2012 On the amendment and completion of the Regulation on credit transfer 170-180/1082 24.08.201216 143 21.06.2012 On the amendment and completion of the Regulation on foreign 166-169/971 10.08.2012

exchange entities17 144 21.06.2012 On the amendment of the Instruction on the procedure of submission to 130-778 26.06.2012

the NBM of reports in electronic form by banks18 147 21.06.2012 On the amendment and completion of the Regulation on publishing 160-164/947 03.08.2012

information on financial activity by licensed banks of the Republic ofMoldova

19 153 28.06.2012 On the NBM interest rates and required reserves ratio 135-141/866 06.07.2012Source: NBM


Table A.43: List of decions of the Council of Administration of the National Bank of Moldova submitted forpublication in the Official Monitor of the Republic of Moldova in II semester 2012

No DCA Date of approval Title of Published in the Official Monitorno. of the DCA the DCA of the Republic of Moldova

number/article date1 166 12.07.2012 On the amendment and completion of the Chart of accounts of the 155-159/929 27.07.2012

bookkeeping within licensed banks of the Republic of Moldova2 170 26.07.2012 On the NBM interest rates and required reserves ratio 160-164/948 03.08.20123 171 26.07.2012 On the NBM base rate on long-term loans 160-164/949 03.08.20124 189 23.08.2012 On the amendment and completion of the Instruction on FINREP 185/1097 31.08.2012

financial situations at individual level, applicable to banks5 193 23.08.2012 On the repeal of the Regulation on the use of irrevocable and covered 181-184/1095 31.08.2012

letters of credit in the Republic of Moldova6 194 23.08.2012 On the amendment and completion of some normative acts of the 181-184/1096 31.08.2012

National Bank of Moldova7 195 23.08.2012 On the amendment and completion of the Regulation on preparing and 237-241/1427 16.11.2012

presenting audit findings8 196 23.08.2012 On the amendment and completion of the Regulation no.33/09-01 o33/09-01 cu 237-241/1428 16.11.2012

granting credits by banks to their employees9 197 23.08.2012 On the amendment and completion of the Regulation on mergers 237-241/1429 16.11.2012

absorptions of banks in the Republic of Moldova10 198 23.08.2012 On the amendment and completion of the Regulation on equity 237-241/1430 16.11.2012

investments of banks in legal entities11 200 30.08.2012 On the NBM interest rates and required reserves ratio 186-189/1106 07.09.201212 212 20.09.2012 On the amendment and completion of the Regulation on the required 205-207/1146 28.09.2012

reserves regime13 214 20.09.2012 On the amendment and completion of some normative acts of the 222-227/1275 26.10.2012

National Bank of Moldova14 218 27.09.2012 On the NBM interest rates and required reserves ratio 209-211/1179 05.10.201215 227 27.09.2012 On putting into circulation some commemorative coins as legal tender 209-211/1180 05.10.2012

and for numismatic purposes16 228 27.09.2012 On the amendment and completion of some normative acts of the 222-227/1276 26.10.2012

National Bank of Moldova17 242 23.10.2012 On the amendment and completion of the Instruction on reporting of the 229-233/1314 02.11.2012

interest rates applied by the banks of the Republic of Moldova18 243 23.10.2012 On the amendment and completion of the Instruction on filling out by 229-233/1315 02.11.2012

the licensed banks of the Report on monetary statistics19 244 23.10.2012 On the amendment of the Instruction on the procedure of submission to 229-233/1316 02.11.2012

the National Bank of Moldova by banks of the reports in electronic form20 248 25.10.2012 On the NBM interest rates and required reserves ratio 229-233/1317 02.11.201221 249 25.10.2012 On the NBM base rate on long-term loans 229-233/1318 02.11.201222 250 25.10.2012 On the approval of the Regulation on the book-entry system of securities 252-253/1547 11.11.201223 252 29.10.2012 On the approval of the Concept of implementation of a unique trading 229-233/1319 02.11.2012

platform for monetary instruments and foreign exchange instruments24 259 08.11.2012 On the amendment and completion of the Regulation on bankcards 252-253/1548 11.11.201225 269 29.11.2012 On the NBM interest rates and required reserves ratio 248-251/1542 07.12.201226 281 06.12.2012 On the repeal of some normative acts of the National Bank of Moldova 252-253/1549 11.11.201227 301 20.12.2012 On the amendment and completion of some normative acts of the 270-272a/1627 27.12.2012

National Bank of Moldova28 307 27.12.2012 On the NBM interest rates and required reserves ratio 6-9/24 11.01.201329 310 27.12.2012 On the amendment and completion of the Instruction on FINREP 6-9/25 11.01.2013

financial situations at individual level, applicable to banks

Source: NBM

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