The health, poli­ti­cal, eco­no­mic and social impact of COVID-19 on Moldova

Fri­mu­Films /​ Shut­ter­stock

Im Rahmen unseres Pro­jek­tes „Öst­li­che Part­ner­schaft 2.0“ ver­öf­fent­li­chen wir eine Arti­kel­reihe über die drei EU-Asso­zi­ie­rungs­staa­ten (Ukraine, Geor­gien, Moldau). Drei Autorin­nen und Autoren aus der Region (Vero­nika Movchan, Irina Guruli, Sergiu Gaibu) ana­ly­sie­ren die gesund­heit­li­chen, poli­ti­schen, wirt­schaft­li­chen und sozia­len Aus­wir­kun­gen von COVID-19 in ihren Ländern.

Most inter­na­tio­nal bodies and rese­ar­chers in the field have a common cer­tainty that this crisis will go beyond the pre­vious crisis of 2008 and could be one of the biggest in the last 50 years. The IMF has fore­cast a 3% drop in GDP for Moldova by 2020. But this sce­n­a­rio is rather opti­mistic. The EBRD fore­casts a decre­ase of 4% and German Eco­no­mic Team has eva­lua­ted the drop of Moldova’s GDP by 6.3%. For March, the Natio­nal Bureau of Sta­tis­tics of Moldova repor­ted a decre­ase in indus­trial pro­duc­tion by 10.5% com­pa­red to March 2019 and 8% com­pa­red to the month of Febru­ary. Freight trans­port decre­a­sed by 15% in March com­pa­red to the same period in 2019. Under these con­di­ti­ons, the dete­rio­ra­tion of the eco­no­mic situa­tion is certain.

The macroeco­no­mic indi­ca­tors of the Repu­blic of Moldova before the crisis showed a good finan­cial sta­bi­lity, this being an advan­tage that could be used for eco­no­mic reco­very. But this window of oppor­tu­nity for Moldova is open for a short period of time and, if taken wrong mea­su­res, these resi­li­ence reser­ves can be quickly deple­ted and the country can be thrown into lasting eco­no­mic sta­gna­tion. In the con­di­ti­ons of the Covid-19 crisis, Moldova will face a decre­ase in foreign exchange inflows from both important sources: remit­tan­ces and exports. In the 2008 crisis, remit­tan­ces fell by 29% and exports by 19.6% (2009 vs 2008). Social iso­la­tion and limi­t­ing inter­na­tio­nal cir­cu­la­tion will amplify the nega­tive effect on these two main cur­rency sources. Remit­tan­ces have droped in March 2020 with 6% and in April with 10% com­pa­ring to the same period of 2019. Exports have recor­ded a drop of 18.3% in March 2020 vs March 2019. Main­tai­ning a suf­fi­ci­ent supply of foreign cur­rency is cri­ti­cal for eco­no­mic sta­bi­lity, ensu­ring the necessary imports for the natio­nal economy and keeping infla­tion in an accep­ta­ble corridor.

The qua­ran­tine mea­su­res have slowed down the spread of the virus. But the uneven app­li­ca­tion of the qua­ran­tine mea­su­res and the tole­rance of the socia­list Government to Russian Ortho­dox Church gathe­rings and some social events important for the pro-Russian Socia­list Party for the upco­m­ing pre­si­den­tial elec­tion cam­paign reduced signi­fi­cantly the effi­ci­ency of the qua­ran­tine mea­su­res. Thus, after two months of effort of social iso­la­tion the number of infec­tions started to rise again dis­sol­ving the hopes of pan­de­mic slow­down. Just a few days ago Moldova regis­tered 10000 persons with posi­tive results on Covid-19. The pan­de­mic reve­a­led the defi­ci­en­cies of the medical system and poor admi­nis­tra­tive coor­di­na­tion and supply. As con­se­quence Moldova regis­tered one of the highest rates of infec­tion among medical staff, redu­cing response capa­bi­li­ties of the medical system to the needs of the population.

In addi­tion to threats to public health, the Covid-19 crisis brings uncer­tainty to the economy. Public insti­tu­ti­ons, busi­nes­ses and house­holds are all affec­ted by the slow­down in eco­no­mic acti­vity, but the main issue is the lack of pre­dic­ta­bi­lity and evo­lu­tion of the pan­de­mic. The vast majo­rity of sectors are expe­ri­en­cing a sharp decline in sales and revenue due to the impos­si­bi­lity of car­ry­ing out normal busi­ness due to dis­rup­tion of supply chains and reduced demand both intern­ally and extern­ally. It becomes certain that the economy of the Repu­blic of Moldova will be affec­ted not only by inter­nal factors, but also by the situa­tion in coun­tries such as Romania, Germany, Italy, Turkey or Russia. Thus, the exter­nal shock could spread to the export channel by redu­cing the demand for pro­ducts pro­ces­sed in lohn (wiring, tex­ti­les). These bran­ches depend directly on the auto­mo­tive indus­try in coun­tries such as Romania and Germany, or the textile indus­try in Italy. Some cate­go­ries of house­holds such as credit holders, tenants, retur­ning emi­grants or workers in the infor­mal economy do not have social pro­tec­tion in crisis situations.

The government is aware of the need to support the economy through social pro­grams and invest­ments. It was deve­lo­ped a few social pro­gram­mes for house­holds that lost reve­nues, but it seems that the inter­ven­ti­ons are late and the admi­nis­tra­tive burden high. The Government intends to con­tract exter­nal loans to invest in infra­st­ruc­ture to support the economy. Cer­tainly, a public invest­ment program can be a sui­ta­ble tool to coun­ter­act the effects of the crisis. However, the Government’s per­spec­tive on public invest­ment is limited mainly to trans­port infra­st­ruc­ture. To this end, it was inten­ded to con­tract EUR 200 million from the Government of the Russian Fede­ra­tion, which failed, due to ambi­guous and risky pro­vi­si­ons of the agree­ment. As con­se­quence the Con­sti­tu­tio­nal Court has can­ce­led the Par­lia­ment rati­fi­ca­tion of the agree­ment. The government is seeking alter­na­tive options for finan­cing their invest­ment initia­ti­ves. In the same time, Moldova has dif­fi­cul­ties to absorb the resour­ces already avail­able from the Council of Europe, the World Bank and the EBRD for road moder­niz­a­tion. Thus, the Government should con­si­der a more stra­te­gic approach to the concept of invest­ment, in order to incre­ase the country’s com­pe­ti­ti­ve­ness and ensure a rate of return of the invest­ment pro­jects capable of genera­ting addi­tio­nal added value in the economy to ensure the repay­ment of newly attrac­ted credit resour­ces and to avoid con­dem­ning Moldova to use current low-income sources to serve these debts. To this end, it is necessary to analyze the effects of the crisis, good inter­na­tio­nal prac­ti­ces and to cor­rectly prio­ri­tize invest­ment projects.


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