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The impact of energy price changes in Moldova

Author

Listed:
  • Baclajanschi, Iaroslav
  • Bouton, Lawrence
  • Mori, Hideki
  • Ostojic, Dejan
  • Pushak, Taras
  • Tiongson, Erwin R.

Abstract

In January 2006 the price of natural gas supplied to Moldova increased from $80 to $110 per thousand cubic meters (mcm). Prices may increase further in the near future, putting additional pressure on the economy and leading to adverse effects on the poorest households. This study examines the potential impact of higher energy prices on the economy of Moldova by simulating the likely macroeconomic consequences of recent and future price increases. Moreover, it estimates the direct impact on individual households using data drawn from the 2004 Household Budget Survey. It assesses the distributional implications of the price shock, noting how the social impact may vary depending on the intensity of energy use, geographic location, and the relative share of energy in household expenditure. The results suggest that energy price changes could dampen economic growth while putting additional strains on the current account deficit. The impact on the poorest households could be significant and protecting them may require resources in the amount of 0.7 to 1.7 percent of GDP. This study identifies possible policy responses to dampen the shock of the energy price increase and to promote the longer-term objective of reducing energy vulnerability.

Suggested Citation

  • Baclajanschi, Iaroslav & Bouton, Lawrence & Mori, Hideki & Ostojic, Dejan & Pushak, Taras & Tiongson, Erwin R., 2006. "The impact of energy price changes in Moldova," Policy Research Working Paper Series 3960, The World Bank.
    • Handle: RePEc:wbk:wbrwps:3960
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    References listed on IDEAS

    as
    1. Nils Junge & Taras Pushak & Julian Lampietti & Nora Dudwick & Katelijn Van den Berg, 2004. "Sharing Power : Lessons Learned from the Reform and Privatization of Moldova's Electricity Sector," World Bank Publications - Reports 14489, The World Bank Group.
    2. World Bank, 2004. "Recession, Recovery and Poverty in Moldova," World Bank Publications - Reports 14424, The World Bank Group.
    3. Matthew D. Shapiro & David W. Wilcox, 1997. "Alternative strategies for aggregating prices in the CPI," Review, Federal Reserve Bank of St. Louis, issue May, pages 113-125.
    4. Julian Lampietti, 2004. "Power's Promise : Electricity Reforms in Eastern Europe and Central Asia," World Bank Publications - Books, The World Bank Group, number 14936.
    5. Freund, Caroline & Wallich, Christine, 1997. "Public-Sector Price Reforms in Transition Economies: Who Gains? Who Loses? The Case of Household Energy Prices in Poland," Economic Development and Cultural Change, University of Chicago Press, vol. 46(1), pages 35-59, October.
    6. Pollak, Robert A., 1989. "The Theory of the Cost-of-Living Index," OUP Catalogue, Oxford University Press, number 9780195058703.
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    3. Ersado, Lire, 2012. "Poverty and distributional impact of gas price hike in Armenia," Policy Research Working Paper Series 6150, The World Bank.
    4. Krauss, Alexander, 2016. "How natural gas tariff increases can influence poverty: Results, measurement constraints and bias," Energy Economics, Elsevier, vol. 60(C), pages 244-254.

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    Keywords

    Energy Production and Transportation; Environment and Energy Efficiency; Energy and Environment; Markets and Market Access; Transport and Environment;
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