Economic Outline

Economic Indicators

Moldova's economic performance has been relatively strong over the past few years but has been repeatedly hindered by the unfavorable global situation or by poor climatic conditions. After the economy collapsed due to the COVID-19 outbreak, GDP returned to its pre-pandemic level in 2021. The economy continues to be burdened by spillovers from the war. After contracting by 5% in 2022, GDP experienced a further decline of 2.3% in the first half of 2023. Thanks to a recovery in the second part of the year, GDP grew an estimated 0.7%, according to official governmental figures. The IMF anticipates GDP growth of 4.3% this year and 5% in 2025, driven by robust agricultural production and a resurgence in consumption and investment. This growth is expected to be fueled by the recovery of real wages and remittances, along with an improvement in risk perceptions.

Concerning public finances, in 2023, the fiscal deficit was projected to have reached 5% of GDP, indicating revenue underperformance and budget under-execution (IMF). In spending, the 2023 budget prioritized responding to the cost-of-living crisis, ensuring energy security, and addressing low civil service capacity. Two supplementary budgets were adopted, in May and October, to allocate additional grants and reallocate resources from under-executing programs. Meanwhile, the debt-to-GDP ratio increased to 35.1% in 2023 (from 32.6% one year earlier) and is expected to follow an upward trend in 2024, reaching 38.4% in 2024, before it edges down to 37.4% in 2025, according to the IMF. Headline inflation decreased to 6.3% in October, down from its peak of 34.6% in October 2022. This decline was driven by lower food and fuel prices, attributed to the recovery in agricultural production following the 2022 drought, as well as a determined monetary policy response. Additionally, core inflation also saw a decline in recent months. Over the longer term, Moldova's economy still faces many challenges, including corruption, political uncertainty, weak administrative capacity, energy import dependence, Russian political and economic pressure, heavy dependence on agricultural exports, and unresolved separatism in Moldova's Transnistria region. Nevertheless, Moldova became an EU candidate country in 2022, and in November 2023, the EU Commission recommended that the European Council opens accession negotiations.

Despite experiencing robust growth over the past two decades, which has led to improvements in living standards and a reduction in poverty, Moldova still ranks among the poorest countries in Europe. Unemployment declined to 3.8% in 2023Q2, after reaching 5.5% in 2023Q1. However, it remains well above end-2021 levels (IMF). In 2022, the GDP per capita was estimated at USD 15,719 by the World Bank, 71.2% lower than the European Union’s average.

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