Is Moldova ready for the economic consequences of the war in the neighboring country?
Commentary by InfoMarket Agency
The military actions in Ukraine will hit the Moldovan economy hard. Trade with the CIS countries, which is carried out mainly by land transport through Ukraine, after reports of the outbreak of hostilities, if not yet suspended, will close in the coming days. In terms of contractual arrangements, these are 100% force majeure circumstances that allow the parties not to fulfill their obligations.
Although, the truth is that, the experience of 2014 showed that cargo transport that is not on Ukrainian territory will be redirected to bypass the neighboring country - via Romania and Poland. But this will increase both delivery time and transportation costs, which could minimize exporters' profits. The lost profit or losses due to this will be laid down in the next contracts..
Here are some simple figures. The volume of exports from Moldova in 2021 amounted to $3,144.4 million, of which $466.2 million (14.8%) accounts for the CIS countries: Russia - $276.1 million; Ukraine - $92.8 million; Belarus - $67.8 million. That is, these three countries account for 93.7% of all exports to the CIS countries.
In 2021, the volume of imports to Moldova amounted to $7176.6 million, of which $1905.3 million (26.5%) accounts for the CIS countries: Russia - $1053.6 million; Ukraine - $667.2 million; Belarus - $145.3 million. That is, these three countries account for 97.9% of all imports from the CIS countries.
It is important to note that natural gas accounts for $417.3 million or 39.6% of the total imports to Moldova from Russia. The supply of gas is a separate topic in general, given that we receive it from Gazprom through the territory of Ukraine. In addition to the fact that the heating season is not over yet, we should not forget about industrial enterprises: for some of them (for example, glass manufacturing) interruption of gas supplies is fraught with a breakdown of expensive equipment and major financial and economic losses. So far, according to statements made on Thursday morning by the General Director of Moldovagaz, Vadim Ceban, gas supplies to the country are carried out in the normal mode.
In this situation, it is good that oil products are supplied to our country mainly from Romania.
Some may assume that Moldova will face a shortage of goods, including food products. After all, Moldovan store shelves have long been occupied by products from Russia, Ukraine and Belarus. But when someone leaves the market, in this case - under the pressure of force majeure, the free place is taken by competitors. In the future, in addition to the revision of the logistics map (bypassing Ukraine) and the increase in transportation costs, one can expect an increase in the supply of goods to Moldova from the European Union, in particular, from Romania.
So there will probably not be any serious deficit, except for some items and not for a very long time. But the fact that imports will become more expensive, that's for sure. If not immediately (new products on the shelves will not scare the buyer), then gradually. All this, in turn, may entail an additional increase in inflation unforeseen by the National Bank.
NBM Governor Octavian Armasu said in early February that the annual inflation rate is expected to be 18.8%, with a maximum of 20.6% per year in the third quarter. But the hostilities in the neighboring country, taking into account the negative economic consequences for Moldova, can make this National Bank forecast, alas, too optimistic. // 24.02.2022 - InfoMarket
