Moldova’s seasonally-adjusted GDP (chart) edged down by 0.5% q/q in Q2, ending the short-lived recovery (+5.3%) seen over the previous two quarters, data released by the statistics bureau on September 15 show.

The annual economic growth remained negative for the fifth consecutive quarter at -2.2% y/y in Q2.

The costly and scarce energy (natural gas, electricity) supply subsequent to the start of the conflict in Ukraine pushed down Moldova’s economy, which plunged by 13.4% over the first three quarters of 2022.

The 5.3% recovery in Q4 and Q1 plus the slight downward correction in Q2 this year leaves the country’s economy 9% (seasonally adjusted terms) down from where it was in Q4, 2021, before the war.

The outlook on further economic advances remains neutral despite the central bank having already eased its monetary policy.

The hawkish monetary policy last year to address inflation over 35% y/y certainly played a role in the economic slowdown. But the constraints derived from the energy market were much tighter. While the central bank lifted the monetary constraints and will probably not reverse its policy, the improvement in the energy market may not be permanent and certainly is not consistent enough (energy remains comparatively costly and more scarce).  

Aggregate consumption contracted by 4.7% y/y in H1 (private consumption: -5.6% y/y), constituting the main driver for the deterioration of the economic activity. The contraction was stronger in Q2 at -6.7% y/y (private consumption: -7.7% y/y).

External demand hasn’t improved in itself, but the country’s exports are at such a low level that they can only improve, although they did so only marginally (+0.4% y/y) in H1. Imports contracted by 3% y/y, in line with shrinking demand.

The production decline was seen in most of the economic sectors (services to households -7.4% y/y, manufacturing -11.8% y/y, construction -15.3% y/y) except for very few, notably IT (+10.2% y/y) and surprisingly horeca (+21.1% y/y, possibly still on a low base).