The most noticeable impact on the furniture industry occurred during the state of emergency, when, along with other commercial units, the activity of furniture show rooms was stopped. The peculiarity of this industry is just-in-time production – within 2-3 weeks after placing orders through furniture show rooms. Respectively, even if there were no restrictions on the activity of furniture factories, the limited capacity of warehouses for storing finished production conditioned the shutdown of production by furniture manufacturers. During the state of emergency, employees in this industry were furloughed with their wages being partially compensated. Consequently, during the 2 months of stoppage, furniture factories incurred costs that were not covered by sales. However, it is estimated that in the absence of a new period of shutdown of activity, the volume of sales in 2020 will be approximately at the level of the previous year. This fact is also due to the return to the country of Moldovans working abroad. The reduction of orders from HORECA had a negative impact, but not a decisive one. The robust performance of the sector in previous years has facilitated access to finance, which has allowed uninterrupted payment of wages from the liquidity reserve.

Online sales have not proven to be a viable solution, given that buyers prefer to appreciate the goods directly in furniture show rooms because size, color, appearance are critical to making the purchase decision. Representatives of the sector noted that the law on e-commerce is designed to pay invoices online and does not meet the requirements.

Representatives of the sector are complying with sanitary protocols, but mention that the closure of furniture show rooms was not justified. The large areas on which the goods are exposed represent a lower risk than public transport.

Furniture production is strongly connected to foreign trade. Raw material imports component in the production of laminated, upholstered furniture and trimmings are practically 100%. Relationships with suppliers have changed during the pandemic. If previously orders were made 4 weeks before delivery, now a minimum of 8 weeks is required. At the same time, suppliers insist on immediate payments, as opposed to the pre-pandemic period. On the other hand, furniture produced in Moldova has a significant share on the Romanian market. This is explained by the speed of execution of orders, affordable prices for furniture produced from laminated material (furniture factories in Romania are oriented towards luxury production, made of wood) and consumer confidence (laminated furniture produced in Ukraine is not in demand).

Labour costs are on a rising trend. Skilled workers (including graduates of vocational schools) take as a reference the wages they could earn in Romania or the Czech Republic, which face a shortage of labor. In the medium term, the productivity of the sector depends on the technology, for example, the purchase of new turning machines would reduce labor costs.

Taking into account the above, it can be stated that the competitive advantage that Moldova currently has in furniture exports will erode with the increase in labor costs, if measures to increase productivity based on new technologies are not taken.

* This information is collected during the discussions conducted by the experts who elaborate the Impact Study of the COVID-19 pandemic on the sectors of the economy. The data can be taken from the website www.consecon.gov.md only with the obligatory mention of the source “Economic Council under the Prime Minister of the Republic of Moldova” and the specification that “The impact study of the COVID-19 pandemic on the economic sectors is carried out by The Economic Council jointly with the Ministry of Economy and Infrastructure, with the support of the European Bank for Reconstruction and Development and the United Kingdom Government Fund for Good Governance. ”

The Secretariat of the Economic Council to the Prime Minister is supported by the European Bank for Reconstruction and Development, funded by the UK Government’s Good Governance Fund, and the International Finance Corporation’s Investment Climate Reform Project funded by the Government of Sweden’s International Development Agency.

The Secretariat of the Economic Council to the Prime Minister is supported by the European Bank for Reconstruction and Development, funded by the UK Government’s Good Governance Fund.