An Analysis of the Impact of Fiscal Measures on the Industrial Sector of the Republic of Moldova During and After the Covid-19 Crisis

Abstract

This paper quantitatively assesses how government measures adopted in 2020 affected the Republic of Moldova’s industrial sector during and after the COVID-19 pandemic. A monthly Industrial Health Index (IHI) was constructed using nine indicators: Industrial Production Index, employment levels, productivity, active firms, producer prices, wages, energy costs, exports, and fixed investments. Data were standardized to z-scores over a 2017-2019 baseline period. A linear continuation of the pre-pandemic slope serves as a counterfactual path against which the actual IHI was compared. The IHI fell by 1.13 standard deviations (SD) in the April 2020 trough but recovered half of that loss within two months. The index overshot and peaked at +2.71 SD in 2021 - 2022, and by the end of 2023, it eased back to a modest shortfall, with the IHI lying 0.46 SD below the projected path. Wages, productivity, and exports primarily drove the rebound in the industrial sector, while energy costs and incomplete recovery in output reduced long-term convergence. The alignment of the industrial sector recovery synchronized with the April - June 2020 government support package. This suggests that changes in fiscal policies and measures promoted by policymakers cushioned the trough in the industrial sector and supported the rebound to an upward trajectory; however, persistent cost pressures limited full trend re-emergence. JEL: E65, L60, O52