Further escalation of the conflict in the Middle East in 2026 is expected to affect Moldova primarily through external price and demand shocks, and in the baseline scenario, this will slow economic growth by approximately 0.9 percentage points – the World Bank
World Bank representatives reported this on Tuesday while presenting the revised Moldova Economic Update (Spring 2026) during a meeting of the Economic Press Club. They noted that, as a small open economy dependent on energy imports, Moldova is particularly vulnerable to fluctuations in global commodity prices and regional growth dynamics. The shock is expected to intensify inflationary pressures, reduce real incomes, and weaken domestic demand, leading to a slowdown in economic growth. The simulation assumes a 50% increase in oil and gasoline prices and a 30% increase in fertilizer prices. Overall, GDP is estimated to decline by approximately 0.9 percentage points in the baseline scenario. The consequences of the conflict are transmitted through multiple channels, which collectively shape macroeconomic outcomes. In particular, the impact is transmitted through the real economy channel (trade and external demand). The slowdown in economic growth among Moldova’s main trading partners (as evidenced by a 0.6% decline in their GDP) reduces Moldova’s export demand, directly reducing domestic output by approximately 0.23 percentage points of GDP. At the same time, the weakening of domestic economic activity leads to a decline in demand for imports, which partially offsets the pressure on the external balance but mainly reflects weak economic conditions. Overall, this channel leads to a reduction in transaction volumes and a slowdown in growth rates. The impact is also transmitted through the inflationary channel (energy and import prices). Moldova’s high dependence on energy imports, which account for about one-quarter of total imports, makes it particularly vulnerable to global price shocks. A 50% increase in oil and gas prices raises import costs and, according to estimates, leads to a rise in import inflation of approximately 15%. As a result, consumer inflation rises by approximately 1.1 percentage points, reducing household purchasing power. Higher prices for essential goods reduce real disposable income, leading to a decline in private consumption of approximately 0.9 percentage points of GDP. This also leads to a significant decline in household welfare, estimated at approximately 3.2 percentage points, with a stronger impact on the most vulnerable households. At the same time, the slowdown in domestic economic activity leads to a decline in imports. Another type of impact is amplification through supply-side effects (agriculture and food prices). The shock is further amplified by supply-side effects, particularly in agriculture. Rising fertilizer prices (an increase of 30% is projected) raise production costs in a key domestic sector, which in turn leads to a rise in food prices of approximately 4.5%. This adds about 0.8 percentage points to overall inflation. At the same time, higher production costs and associated inefficiencies reduce output, exerting an additional negative impact on GDP of approximately 0.4 percentage points. Together, these factors reinforce each other: higher prices suppress demand and constrain supply, leading to a more sustained macroeconomic adjustment. In 2026, the shock will be most pronounced, with a contraction in GDP and consumption, alongside a sharp rise in inflation driven by energy and food prices. Starting in 2027, the impact begins to ease as external conditions stabilize and base effects fade, allowing demand to gradually recover and inflation to decline. In the medium term, output losses remain limited but highlight Moldova’s structural vulnerability to external shocks. // 26.05.2026 – InfoMarket.
