In relative terms, we project faster productivity growth in agriculture than in other activities; this is consistent with long-run international trends and seems very likely given the currently low productivity levels in Moldova’s agriculture (cf. Expert Grup, 2010).<sup>9</sup> It is also important to note that the growth that takes place under the _base_ scenario is underpinned by substantial and productivityraising investments in public infrastructure (such as roads and energy transmission) (cf. discussion in World Bank 2011). Table 5 summarizes the year-on-year development of selected macro variables under _base_ scenario.

**Table 5. Base: Development of selected real macro variables.**

||**2008**|**2012**|**2013**|**2014**|**2015**|**2016**|**2017**|**2018**|**2019**|**2020 2**|**012-2020**|
|---|---|---|---|---|---|---|---|---|---|---|---|
|Absorption|97,601|3.8|4.3|4.1|4.1|3.9|3.8|3.7|3.6|3.7|3.9|
|Consumption - private|58,706|4.1|4.4|4.2|4.2|4.2|4.1|4.1|4.0|4.0|4.2|
|Consumption - government|13,931|1.1|2.2|2.0|1.9|1.6|1.3|1.2|0.9|0.9|1.5|
|Fixed investment - private|19,731|4.7|5.3|5.2|5.1|4.4|4.0|3.9|3.9|3.9|4.5|
|Fixed investment - government|1,924|4.0|4.4|4.3|4.2|4.1|3.9|3.9|3.9|3.9|4.1|
|Exports|25,005|0.6|3.4|3.6|3.7|4.3|4.8|5.1|5.4|5.3|4.4|
|Imports|58,474|2.5|3.8|3.7|3.8|3.8|3.8|3.9|4.0|4.0|3.8|
|GDP at factor cost|53,735|3.3|4.3|4.3|4.3|4.3|4.3|4.4|4.4|4.4|4.3|
|Total factor employment (index)||3.5|3.1|2.8|2.6|2.4|2.3|2.1|2.0|1.9|2.4|
|Total factor productivity (index)||-0.1|1.3|1.5|1.7|1.9|2.1|2.3|2.4|2.4|1.9|
|Real exchange rate (index)||-0.3|0.4|0.4|0.3|0.2|0.1|0.0|-0.1|-0.1|0.2|
|Headcountpovertyrate(%)|27.3|21.4|19.3|17.4|15.7|14.2|12.9|11.6|10.6|9.5||

Note: the column 2008 shows values in million lei; the final column shows the average growth rate for the period 20122020; the other columns show annual growth rates (%).

The fact that, for the full simulation period, absorption grows at a slower pace than GDP indicates that exports have to increase more than imports due that non-trade items in the balance of payments does not fully keep up with overall growth. Among the domestic final demand items, growth in private consumption is relatively fast, growth in government consumption relatively slow, while both private and government investment growing at rates similar to those of total absorption. Total factor productivity grows moderately. Our assumption of increased full-time employment is important for reaching the base growth rates. If employment growth would not materialize, it would mean that labor scarcity would be even more severe making additional productivity growth necessary unless a lower rate of GDP growth is imposed. The real exchange rate is almost unchanged, showing that domestic productivity, export and import prices, and non-trade items in the balance of payments together evolve in such a way that additional adjustments in export and import incentives are not needed to maintain external balance.

Over the study period, the shares of industry and services of total production increase marginally at expense of agriculture and other primary activities (see Table 6). The share of government services increases from the base year 2008 to end of the period from 12.5 to 13.8 percent of GDP. The fact that, at the same time, government services increase as a share of GDP but has relatively slow real growth reflects relatively rapid growth in the price index for government services, in its turn due to rapid wage growth and the labor-intensive nature of these services.

For the total government, the _base_ scenario generates a small decrease in the GDP share (Table 7). In the beginning of the simulation period, foreign transfers grow a bit faster than GDP, but their share

> **9** Lofgren’s (2011) survey of the literature on productivity growth shows that productivity growth tends to be highest within agriculture, followed by manufacturing, with services at the bottom.

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