Transnistria: uncertain economic outlook
The Transnistrian economy has been in crisis mode for many years due to the undiversified structure of the economy and the precarious state of the public finances. The industrial sector, which accounts for about 30% of Transnistrian GDP, is dominated by only two companies: steel producer MMZ and the electricity plant Moldavskaya GRES.
A decline in the output of either company usually results in protracted recessions. To make matters worse, an economic slowdown in the industrial sector is typically aggravated by public sector spending cuts as the large budget deficit of 23% of GDP leaves no
room to compensate any revenue short-falls.
Reforms such as the implementation of the Deep and Comprehensive Free Trade Agreement (DCFTA) between the EU and Moldova and a planned public sector reform could help to address the structural problems of the Transnistrian economy. However, both require time and resources which are in short supply. Indeed, recent Ukrainian sanctions against Russian companies and American punitive tariffs on steel could halt steel production triggering the nexteconomic crisis.
