Moldova

Moldova is an upper-middle-income economy with a population of over 2.4 million people (2025). Located in Eastern Europe, it borders Romania and Ukraine.

Moldova’s growth has been affected by successive shocks: the COVID-19 pandemic, spillovers from Russia’s invasion of Ukraine, and energy price spikes. These shocks have exposed the limits of a remittance-led economic model and strained households and public finances. Structural constraints remain significant, including low domestic competition, weak market institutions, and labor and skills shortages. Poverty remains widespread, particularly in rural areas, reflecting distributional impacts of recent shocks. An aging population further constrains labor force participation, particularly for women, limiting jobs and welfare gains, and underscoring the need for urgent structural reforms. EU candidacy provides Moldova with a reform anchor to enhance productivity, competitiveness and institutional quality.

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Moldova’s real GDP growth slowed sharply to 0.6% in H1 2026 year on year. Net exports contributed 1.9 percentage points (pp) positively to growth as well as consumption (+1 pp) driven by a 3.3% real-wage rise. However, gross capital formation dragged significantly on growth (-2.5 pp), reflecting weaker building investment and inventory unwinding. On the production side, growth in manufacturing, trade, energy, transport, and agriculture sectors were largely offset by contractions in construction, information and communication technology (ICT), and real estate. External imbalances remain large despite improvements, with the four-quarter CAD (on a rolling basis) at 19% of GDP in Q1 2026, compared to 19.6% of GDP in 2025. A smaller goods deficit, despite high energy imports, and a wider services surplus narrowed the trade gap, as exports rose 12.5% on strong agricultural shipments. With weaker remittances and foreign direct investment (FDI), the CAD deficit was financed mainly through cash and reserves. Gross external debt rose to 58% of GDP, though liquidity risks eased as short-term debt fell.

Annual inflation increased to 7% in August 2026, above the upper bound of the National Bank's target band due to the impact of higher energy prices from the conflict in the Middle East. Pressures from energy, non-tradables, and food prices weigh on real incomes and poverty reduction efforts, with the poverty rate remaining around 21%. In response to inflationary pressures, the Bank raised the base rate to 9% in September.

Credit expanded modestly, supported by business lending, while mortgage lending contracted and NPLs rose to 5.2%. In the first seven months of 2026, revenues grew more slowly than expenditures, and grants fell by 1.5 pp of GDP year on year, widening the budget deficit to 3.2% of estimated GDP. Spending was driven by procurement, higher domestic interest payments, and an 18% increase in capital investment. Public debt edged down to 37.7% of GDP in H1, while cash reserves continued accumulating.

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Since Moldova joined the World Bank in 1992, over $2.5 billion has been allocated through more than 50 IBRD/IDA operations in the country. Currently, areas of support include energy, regulatory reform and business development, education, roads, health and social sectors, agriculture, disaster risk management, environment, and water supply and sanitation. There are 11 active IBRD/IDA operations amounting to $822.8 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.

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.

Together with World Bank-managed grants outside the IBRD/IDA envelope, the total World Bank Group program in Moldova since 1992 amounts to over $3  billion in committed funds across more than 120 operations.

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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.

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