The World Bank Group in Moldova

Country Context

Moldova's economic recovery remains fragile due to energy price shocks from the non-renewal of the gas transit contract through Ukraine in January 2025 and the ongoing impact of Russia's invasion of Ukraine. Despite meeting energy needs through European Union (EU) imports, Moldova faces higher energy prices and increased fiscal costs. While the outlook is moderately positive, risks include prolonged conflict, energy price volatility, the 2025 parliamentary elections, and slower growth in key trade partners amid an uncertain global trade outlook. Poverty persists, particularly in rural areas, while declines in remittances and an aging population add pressure to the economy. Low labor participation hampers employment growth. Progress on EU accession and structural reforms is crucial for long-term growth, with the EU offering significant support for reforms and energy independence.

Adverse weather events and energy shocks due to Moldova’s heavy dependence on energy imports and limited diversification in energy sources pose substantial risks to the country’s agricultural sector and livelihoods. With EU candidate status, strong reform momentum and growth-enhancing, climate-resilient investments are needed to foster long-term, sustainable development and convergence toward EU income levels.

Last Updated: Apr 23, 2025

Strategy

The current FY23-FY27 World Bank Group Country Partnership Framework (CPF), aims to address the dual challenges of the current crisis stemming from Russia’s invasion of Ukraine as well as longstanding and longer-term reform challenges, with a phased approach of activities to support the government’s development agenda and the goal to advance toward European Union accession. The CPF provides a flexible approach in identifying activities—both lending and analytical—under the overarching objective of supporting green, resilient, and inclusive development and competitiveness in Moldova. The framework is based on three high-level objectives: (i) increased formal employment; (ii) improved human capital; and (iii) increased green and resilient investments. The objectives of the CPF focus on key areas including enterprise competitiveness, decreased regulatory burden, key aspects of health and education services, increased energy security and efficiency, and green investments, particularly in infrastructure and agriculture. A critical feature of the CPF is capacity-building and digitization efforts to strengthen systems and institutions across a broad swath of government and private sector actors at national and local levels.

The World Bank also established a multi-donor trust fund program aimed at complementing CPF implementation and supporting the Government of Moldova in investing and strengthening its institutions to become more competitive, resilient, and inclusive as the country is pursuing integration with Europe. The Moldova Growth, Resilience and Opportunities for Well-Being (M-GROW) Program Multi-Donor Trust Fund, managed by the World Bank, will provide a coordinated financing and support mechanism to assist the government in mobilizing financing for transformative projects and strengthen capacity to prepare and implement them. Early priorities for M-GROW focus on support for enhanced competitiveness, energy efficiency, and strengthening the institutional and governance environment. M-GROW’s founding partners include Ireland, Norway, and the United Kingdom, who have together contributed the equivalent of $32.2 million. 

As part of the World Bank Group’s joint country representation for Moldova, the International Finance Corporation (IFC), with its focus on private sector development, continues to support Moldova's transition to a new growth model and EU accession by promoting green, resilient, and inclusive development. This is achieved through investments and advisory services that enhance efficiency, productivity, and value chain development across sectors. IFC aims to support the country in developing public-private partnerships (PPPs) in the transport sector and renewable energy. Additionally, IFC plans to invest in key sectors identified as priorities in the 2022 Country Private Sector Diagnostic which highlighted significant growth potential in two enabling sectors—(i) financial services and (ii) transport and logistics—and three tradeable sectors: (iii) renewable energy, (iv) agribusiness, and (v) ICT/business process outsourcing.

Current engagements by the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, include investment through political and economic risk insurance offerings.

Last Updated: Apr 23, 2025

Recent Economic Developments

In 2024, Moldova's economy experienced mixed outcomes, ending the year with marginal growth of 0.1%. The initial economic expansion, driven by private consumption and investment, was offset by a contraction in the latter half due to declining public consumption and net exports. Rising imports and reduced re-exports to Ukraine impacted trade, while the IT and financial sectors performed well. Conversely, transport, real estate, and agriculture, affected by a summer drought, contracted. The current account deficit widened significantly to 16% of GDP, driven by a growing trade gap, lower remittances, and a reduced primary surplus, and was primarily financed through debt and deposits.

Inflation dropped from 13.4% in 2023 to 4.7% in 2024, mainly due to lower food and import prices and modest currency appreciation. However, inflation spiked late in the year due to increased gas tariffs, prompting the National Bank of Moldova to raise the interest rate to 6.5% in early 2025. Fiscal deficit was lower than planned, registering 4% of GDP, supported by stronger tax revenues. Despite increased spending on wages and social programs, public investment lagged. Public and publicly guaranteed debt is projected to reach 37.5% of GDP, with most of the fiscal deficit financed externally.

Economic Outlook

In 2025, Moldova's economy is projected to grow modestly by 0.9%, as energy price shocks reduce household purchasing power and hinder economic activity. Although government support measures for vulnerable households and firms provide some relief, private consumption will grow slowly, and investment will remain weak due unfavorable monetary conditions and investor confidence. Public consumption will play a more prominent role, while subdued exports, especially to Romania, will continue to drag on growth.

Looking ahead, the economy is expected to recover gradually, driven by reforms that improve competitiveness and support EU integration. Consumption will remain the main growth engine, with investment picking up as Moldova deepens ties with the EU. Growth will be led by the IT and service sectors, with industry stabilizing and agriculture constrained by low productivity.

The current account deficit will stay high due to a persistent trade gap and expensive energy imports, though it is expected to ease in the medium term. Inflation will remain above the 5% target in 2025 but is expected to stabilize by 2027. The fiscal deficit will reach 4.5% in 2025, before declining to 3% by 2027 as support measures are phased out.

Last Updated: Apr 23, 2025