Moldova’s seasonally-adjusted industrial output contracted by 6.3% m/m in February, and by 6.6% m/m in the core manufacturing industries, the statistics bureau announced. The activity index, in unadjusted terms, marked a 4.4% y/y decline (-3.0% for the manufacturing industries), the worst performance since January 2021.
The slowdown should in principle reflect rising energy prices, while the effects of the war in Ukraine are still to come. However, the major effects on Moldova’s industrial activity, as of February, seem to come from the disruption of the global production chains, mainly in the automotive industry.
While the soaring energy prices are deteriorating companies’ profits, the factories that supply parts to European car makers were the first to reduce their output, in February.
The output in the industry of electronic and optic devices plunged by 22% m/m (-17% y/y). Production of electric devices dropped by 12% m/m (-57% y/y) as well.
In contrast, the output of the metallurgical sector increased by 4.3% y/y (-3.5% m/m), although it should have been among the most sensitive to the rising energy prices.
Separately, the manufacturing of pharmaceuticals contracted by 29% m/m (-26% y/y).
Moldova’s industry had recovered quickly from the COVID-19 crisis suffered in 2019, and by February 2021 the production indices were already in line with the pre-crisis levels. The advance continued until January this year.
But the outlook has visibly deteriorated after the war emerged in Ukraine, not necessarily because of its proximity, but rather as an effect of the slower growth in Europe. The shock of the high energy prices is expected to produce some changes in the structure of the country’s industry as well. But given Moldova’s lack of domestic energy resources, there were no energy-intensive industries developed and the impact will be seen rather in terms of prices and profit margins.