Vulnerabilities of the Romanian Manufacturing Industry in the Context of the War in Ukraine

The manufacturing industry has played a pivotal role in driving economic development, closely intertwined with the growth of the gross domestic product. The inflationary shock stemming from the economic and geopolitical repercussions of the war in Ukraine has disrupted the cost structure of the industry, impacting its competitiveness. Additionally, the strategic priorities outlined in the European Ecological Pact by the European Union have added further pressure on the industry. In Romania, the manufacturing industry stands as one of the largest consumers of energy, accounting for 27.1% of final energy consumption in 2021. The surge in energy prices during the Ukraine war had adverse effects on industry production, resulting in a contraction of 0.4% in 2022, despite a 4.6% increase in the gross domestic product during the same period. In this context, the paper identifies the activities within the manufacturing industry that are most vulnerable to the impacts of the Ukraine war. Moreover, the study delves into the relationship between investment intensity and energy intensity across the main activities of the manufacturing industry. It underscores that activities with higher energy intensity also exhibit lower investment intensities. The paper also estimates two autoregressive vector models, enabling an econometric analysis of the impact of the substantial increase in industrial production prices on the manufacturing industry’s production. The findings indicate that activities characterized by higher energy intensity have borne the brunt of these effects.