Moldova (Republic of)

Rebound in economic growth after years of external shocks

Moldova’s economy is gradually picking up after several years of successive shocks from the war in Ukraine, energy disruptions and drought. After near-zero growth in 2024, activity is expected to strengthen in 2025-2026, supported by recovering domestic demand, agricultural output (rebounding after weather-induced declines) and continued EU support. ICT services and other service sectors (notably road transport) will remain key drivers, benefiting from strong external demand, while industrial production is expected to gradually recover as export logistics and investor confidence improve. The EU Reform and Growth Facility will stimulate public investment, while continued real wage growth, recovery in the labour market, increases in public and minimum wages, and high remittances from the EU will sustain household consumption. Inflation, which peaked above 28% in 2022, has fallen sharply and is projected to return close to the National Bank of Moldova’s (NBM) 5% target by 2026 following an energy supply shock in early 2025 due to the disruption of Russian gas transit through Ukraine, which added to inflationary pressure. A further decline in food and regulated energy prices should help sustain the downtrend.

Relatively resilient public accounts confronted with high external dependency

Fiscal conditions remain challenging. Although the deficit narrowed to 3.9% in 2024, it is set to widen in 2026 due to higher public wages, energy support measures and investment needs associated with the EU-supported Reform and Growth Facility. Moldova’s fiscal outlook hinges heavily on continued IMF, EU and World Bank support, which currently covers a large part of the country’s financing needs. The IMF’s Extended Credit Facility/Extended Fund Facility programs (totalling USD 790 million over 2021-2025, augmented by a USD 173 million Resilience and Sustainability Facility) have been crucial in bridging financing requirements despite market volatility. Public debt remains moderate but will rise gradually without sustained consolidation. Debt, 59% of which is external, is mostly long-term and concessional – over 80% of external public debt is owed to international institutions, which enables the debt servicing costs to remain manageable. As a result of the sticky deficit, debt is on an uptrend. Moldova has a moderate risk of debt distress given the favourable (external) debt-profile and anticipated growth recovery.

Moldova faces major external vulnerabilities. The ongoing war in Ukraine is weighing on investor confidence. Moreover, the current account (CA) deficit remains structurally high due to the narrow export base and high import reliance, especially for energy and equipment goods. It widened to 16% of GDP in 2024 and is expected to increase further in 2025-2026. Domestic exports should notably rebound in step with agriculture production, but this will be upset by higher import of investment goods and the decline in re-exports of fuel and goods to Ukraine which started in late 2024 due to logistics issues. Nevertheless, net exports should be less of a drag. The trade deficit, which is structurally very large at over 30% of GDP, continues to be the main driver of the CA imbalance. That said, service exports, notably IT services, and remittance inflows (about 10% of GDP) provide a crucial offset. The leu operates under a managed float and has remained broadly stable with limited intervention from the NBM. Vulnerability to renewed energy shocks persists, especially regarding Transnistria’s electricity supply, though Moldova has made notable progress in diversifying gas and power imports through Romania and the EU system.

Stable financial sector, but low financial activity

Moldova’s financial sector is relatively strong and has been a stabilising anchor. Banks are well capitalised – the bank capital adequacy ratio was 26% in 2025 – profitable and liquid due to stricter regulations, loan write-offs and cautious lending practices. Banks largely invest in government securities and high-grade instruments. Despite this resilience, loans to the private sector are only gradually recovering from a slump. The overall loan-to-GDP remains very low (24% in 2024), signalling that many firms and consumers are not accessing bank credit. Part of this is due to structural factors – small firms prefer to seek informal financing and banks have a limited presence in rural areas – and partly due to banks’ risk aversion. Furthermore, the non-banking financial sector is underdeveloped. The insurance sector is fragile and capital market activity is weak, resulting in under-diversification of financing sources.

Highly polarised political landscape

Politically, Moldova’s risk profile is shaped by regional geopolitical tensions (Russia’s war against Ukraine), polarisation and institutional fragility. President Maia Sandu’s pro-EU Action and Solidarity Party (PAS) controls both the presidency and, after the 2025 elections, an outright majority in parliament (about 50% of the vote and 55 out of 101 seats), allowing it to roll out an ambitious reform and EU-accession agenda. At the same time, the political field remains sharply polarised: a fragmented but noisy pro-Russian opposition, rooted in the Socialist milieu and newer populist alliances, continues to contest government policy especially in poorer and more conservative regions, and in the autonomous region of Gaugazia where pro-Russian forces won over 80% of the vote compared with only around 3% for PAS. Recent electoral contests included a referendum to endorse the European path, which passed by a narrow 50.4%, after being strongly backed by urban voters and the diaspora but rejected in Gaugazia and parts of the north, which underscores the extent of societal division. The main external risk is Russia. In the separatist region of Transnistria, roughly 1,000-1,500 Russian troops and local security forces provide Moscow with a permanent lever against Chi?in?u, even if a full-scale military escalation currently appears unlikely. The risk lies in chronic destabilisation such as disinformation campaigns, financing of pro-Russian actors and attempts to discredit elections.

Last updated: November 2025