Recent Economic Developments
Despite a modest 1.1% growth in the second quarter, Moldova’s economy was flat in the first half of 2025. The increase in domestic demand could not offset the decline in net exports. Total consumption added 3.4 percentage points (pp) to growth, supported by strong wages and energy-related transfers. Capital investment added 8 pp amid favorable interest rates and inventory restocking. However, net exports were a major drag on growth, as imports growth was driven by stronger domestic demand, while exports declined due to drought-affected agriculture, reduced reexports to Ukraine, and weaker external demand. On the supply side, growth was supported only by construction, information technology and the energy sector, which together contributed 0.7 pp. Manufacturing, real estate and agriculture posted the largest declines, reducing growth by 0.9 pp.
On the back of weak external demand and higher energy imports, the current account deficit (CAD) reached a record high in the first half of 2025. It almost doubled year-on-year to $1 billion, or over 23% of GDP. The deficit was financed through a drawdown of cash and deposits, debt issuance, and modest foreign direct investment (FDI) inflows. External debt increased by 1 pp to 57.7% of GDP, while international reserves reached $5.1 billion at end-August.
Inflation has moderated compared to the beginning of the year, when energy prices spiked, but it remains in the upper bound of the target range. In the first eight months of 2025, consumer prices rose 8.2%, driven by energy tariffs and elevated food prices amid weaker agriculture output. In response, the National Bank of Moldova reduced the policy rate by 25 basis points to 6.25%.
The fiscal deficit narrowed to 3.3% of GDP in the first eight months of 2025, as revenue growth outpaced an increase in spending. Gains in social contributions, foreign grants, and VAT and income taxes offset higher spending on wages, goods and services, and social programs. Public and publicly guaranteed debt declined by 2.6 pp from end-2024 to 36.2% of GDP by June, while cash reserves rose by over 50%.