Newsletter Issue 62 | November – December 2020

Drought-hit agriculture sector slows economic recovery

Agriculture is one of the economic sectors that have been less severely affected by the COVID-19 pandemic. Thus, it could be excepted that it would have a stabilizing effect on economies with large agricultural sectors such as Moldova, where agriculture accounts for 11% of GDP. Unfortunately, a stabilizing effect could not be achieved due to a severe drought that hit the country in the first half of the year. The effects of this have become visible in Q3 2020, which includes the harvesting season and when output in agriculture dropped by 31%. The crops worst affected by this drought, corn, soybeans, sunflower, wheat and grapes, are among the most important agricultural exports. Considering that agricultural and food products make up 40% of Moldova’s exports, this has a large impact on the economy as a whole. Based on the size of the agricultural sector and its predicted overall decline of 27% in 2020, we estimate that the drought would have a negative effect on GDP in the range of 2 to 3 percentage points. It is therefore clear that instead of finding stability in agriculture, Moldova suffered from a double shock in 2020 with COVID-19 and the drought.

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