Page 95 - SE Outlook Regions 2022

new government, the country sealed a relatively favourable five-year
contract with Gazprom. This gives the country time to set in place a
decently functioning retail market for electricity and ga) and prepare
necessary infrastructure to increase competition on the wholesale
market or at least find alternative suppliers. For this, the country needs
massive investments in infrastructure and to set up a functioning market
in order to prevent situations like the one in November 2021. This is
hard to achieve as long as Inter RAO sells Moldova electricity produced
in the separatist republic of Transnistria using natural gas that it
receives from Gazprom but does not pay for. This political game has to
be discontinued one way or another if the pro-EU regime in Chisinau
sincerely seeks to set in place a functioning market.

But above all, Moldova needs to prepare to face high energy prices.
This can be done by sharp appreciation of the local currency supported
by a significant amount of foreign investments. This is the optimistic
scenario.

Moldova is still fully dependent on Russian natural gas and the
Russia-controlled power plant in separatist Transnistria. Changing this
can be achieved only by massive investments in interconnections that
cannot be undertaken by the private sector without massive support
from government and/or multilateral institutions. This was the case with
the natural gas connection with Romania

Gazprom extended Moldova a five-year contract under terms that are
better than the country can expect from alternative resources — but
worse than the terms provided to Russia’s political allies like Serbia.
This is visibly aimed at depressing incentives for private suppliers and
at the same time preserving the competitive advantage (economic and
political) for the regimes that are loyal to Russia.

Everything now depends on how much support Moldova will get from
the European Union to develop the infrastructure necessary for the
country's connection to Europe’s gas grid. So far, the European Union
has demonstrated robust commitment to Moldova, particularly during
the gas crisis in November.

3.6.5 Construction

The volume of construction works in Moldova increased by 7.6% y/y in
January-September, 2021. The largest segment of the market, that of
civil engineering (infrastructure) works, accounting for 42% of the total
in the nine-month period of 2021, stagnated. The growth was driven by
the 21% advance of the volume of works for residential properties (31%
in the nine-month period) while the works on non-residential buildings
(25%) advanced by 7.5% y/y as well.

The significant advance of the construction activity in 2021 comes after
the steadily robust performance in the previous three years. In the first
three quarters of 2021, the sector accounted for 11.6% of the total
gross value added generated by the country's economy. It contributed

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