Industry takes pause before recovering lost positions. Economic analysis by Info-Prim Neo

The last statistical data on industrial activity in Moldova are again negative. In October, industry took a new pause before recovering the positions it lost during the past two years, when it has been in decline. The Moldovan industry this October saw a 3.0% decrease on last October. The industrial output in the first quarter of this year rose by over 7% compared with the corresponding period last year and the expectations were optimistic. But in October, this figure fell to 2.0% from 2.7% a month before. This happened even if the businesses working in industry had bright expectations. “Confidence in the industrial sector has increased owing to the improvement of the production capacities and to a relatively optimistic business situation in the previous month,” experts of IDIS ”Viitorul” said recently. The forecasts made earlier this year, which anticipated an industrial recovery after the 2006 and 2007 shocks on the basis of the development of the food, textiles and clothing industries, have not yet come true. The earlier forecasts that the industry will grow by 9-12% are extremely optimistic. Industry looks like a sector stricken with convulsions. After significant growths that reached 11.4% in February and 4-6% in the next three months, the industrial output fell by 3.7% in May and was then negative during three months of the July-October period. The rises from the start of the year faded following the deceases in the past months. Processing industry, which has a share of 88.3% of the industry, rose by only 1.6% in a favorable agricultural year. The policy of the low prices of agricultural products encouraged by the state made the producers decide not to sell their goods. Consequently, the volume of processed and canned fruit and vegetables fell by 9.6%. The 36.1% rise in wine industry is also lower than projected if taking into account the high grape harvest this year. The 7.6% increase in the food and beverages industry, as opposed to a 0.8% decrease in the first ten months of last year, stemmed mainly from rises in the sugar industry, wine industry and alcoholic drinks industry and partly from the rise in the dairy products industry. Tobacco growing, which earlier brought large incomes to agriculture, is also in decline. Manufacture of tobacco products decreased by 12.4%. Experts say that the clothing industry was the greatest disappointment. At the start of the year, there was anticipated a growth of 25%, but production levels in this sector dropped by 14.7% over ten months. As a result, the general growth rate in industry fell by 1.6%. Production of textiles decreased by 6.8%. These two sectors would be probably affected by the world financial crisis given that the clothes and textiles are made to the foreign clients’ order. Hit by the crisis in their countries, they could reduce the number of orders as they did in the neighboring countries. It is not excluded that the manufacture of finished metal products will be also affected as the demand for such products from the Western counties has already decreased, while the Rabnita Metallurgical Plant reduced production levels. Production of cement, plaster and concrete items has also dropped. In 2006, Moldova’s industry fell by 6.9%, while in 2007 – by 2.7%. If the trends of the past months persist, this year the industry will be also in decline. The state programs aimed at stimulating industry cannot produce results in a sector that must be restructured and modernized so that it meets the standards and demands of the foreign markets.