The decline in Moldova's GDP in 2020 by 7% was the result of restrictions introduced to combat COVID-19, which led to a significant decrease in production, trade, increased unemployment, and a decrease in consumption - Ministry of Economy and Infrastructure.
The ministry said this, commenting on the data on gross domestic product for 2020 published by the National Bureau of Statistics, according to which GDP amounted to 206.3 billion lei and decreased by 7%, compared to 2019. Last year, amid a sharp drop in demand, disrupted global value chains and high levels of uncertainty, companies reduced their investment and export activities. These effects were compounded by unfavorable climatic conditions, which led to a significant decline in the agricultural sector. Thus, in 2020, most sectors of the economy had a negative impact on the dynamics of GDP, but the main impact was made by the agricultural sector (-2.7 percentage points), the sphere of domestic wholesale and retail trade (-2.1 percentage points), industry (-0.6 pp), professional, scientific and technical activities (-0.5 pp), real estate transactions (-0.3 pp), etc. At the same time, during the crisis, the economy was supported by the construction sector. Investments in infrastructure financed from the Road Fund (2 times more) and from external loans (+ 32.3%) had a positive impact. The increase in these investments was reflected in an increase in the volume of investments in engineering structures: roads, water supply and sewerage systems, etc., which increased by 14.7% in 2020, reaching about 6.3 billion lei. Despite the challenges of 2020, the Financial and Insurance Sector grew by 5.7% and contributed 0.2 pp to GDP. Credit institutions made profits both from their core business, lending, and from related foreign exchange transactions and payment transactions in the case of banks. The insurance industry also benefited from compulsory insurance, especially auto insurance, which has maintained high margins. Herewith, on the demand side, the restrictive measures introduced in the context of the spread of the pandemic have led to a sharp decline in the consumption of the population. With a significant share of 81.2%, its contribution amounted to -5.8 percentage points to GDP. Consumption of services has been severely affected, a sector that has been severely restricted to prevent the spread of the pandemic. In addition, the lack of financial resources and uncertainty caused by the COVID-19 crisis have led to a decline in investment activity. Investments from the own funds of economic agents, which had the greatest negative impact on investment activity, suffered the most from the crisis. Investments in machinery and equipment and buildings have significantly decreased. Likewise, the pandemic crisis severely affected the flow of foreign investment, while government investment was constrained by budget constraints. Thus, gross fixed capital formation decreased by 2.1% and had a negative contribution of -0.5 percentage points. A decrease in external demand from the main partners of Moldova led to a decrease in exports of goods and services by 15.5%, and a decrease in consumption led to a decrease in imports by 8.9%, respectively, these involutions generate a contribution to GDP of - 4.9 p.p. and -5 pp, respectively.// 17.03.2021 — InfoMarket.
