Moldova's proximity to the war in Ukraine, vulnerability to external and climate shocks, and the risks posed by the upcoming elections pose a number of negative risks.
As noted in the new World Bank Economic Review, an escalation of the Russian invasion of Ukraine could adversely affect economic activity, financial stability, and investor confidence by discouraging domestic debt financing. Volatility in energy prices could create additional pressure to reallocate spending to prevent social unrest, especially in the context of upcoming elections and the risk of disrupting gas transit through Ukraine by the end of 2025. This transit route is important for the regions on the left bank of the Dniester River and Moldova, facilitating the purchase of electricity at a better price than that available in EU markets. Unresolved disputes over the historical gas debt between Moldovagaz and Gazprom further exacerbate economic uncertainty. Vulnerability to extreme weather events, especially in agriculture, also increases risks. However, social protection measures, efforts to diversify energy sources, and strong commitments to reform mitigate some of these risks. Political tensions exacerbated by Russia's invasion of Ukraine and upcoming elections, as well as tensions in the Transnistrian region and Gagauzia, pose governance risks that could destabilize the government and the reform agenda. Short-term priorities include supporting the population to meet immediate needs caused by the consequences of Russia's invasion of Ukraine and the energy crisis. WB experts say that having effectively passed the previous cold season, the priority, in addition to preparing for the next one, should focus on the next one. From a social point of view, it is crucial that the authorities ensure the availability of energy resources in the upcoming cold season, while improving the efficiency and targeting of social protection programs, especially those aimed at the most vulnerable groups of the population. From an energy security perspective, encouraging the adoption of energy efficient practices and renewable energy sources should improve both the security as well as the availability of energy resources. // 15.05.2024 - InfoMarket.
