Fitch Ratings has affirmed Moldova's long-term foreign currency issuer default rating at ‘B+’ with a stable outlook
As noted in the rating agency's statement, Moldova's “B+” rating reflects its commitment to policies that have maintained macroeconomic and financial stability amid a series of potentially destabilizing shocks, low but growing public debt with a manageable repayment schedule, access to external financial assistance, and higher GDP per capita compared to other countries. These factors are offset by the small Moldovan economy's high exposure to geopolitical risks related to the war in Ukraine, frozen conflict, and potentially destabilizing foreign interference in domestic politics, as well as a significant structural current account deficit and high net external debt. Fitch Ratings pointed to high geopolitical risks, emphasizing that Moldova is extremely vulnerable to the consequences of the war in Ukraine due to its geographical proximity, Russia's interference in domestic politics and military presence in Transnistria, as well as the risk that domestic political events could disrupt the ongoing reorientation of foreign policy towards the West. Parliamentary elections in Moldova are scheduled for the end of September amid the risk of external interference, but the outcome of the elections and the process of forming a government could also create the risk of slowing down the EU integration process. Fitch Ratings also noted the easing of the energy shock, recalling that in early 2025, Moldova faced its third energy shock since 2021, when Russian gas supplies to Transnistria were interrupted, affecting the country's electricity supply. Improvements in external reserves, access to external financing, alternative electricity imports, and growth in domestic production, including from renewable sources, helped Moldova avoid significant disruptions, apart from higher electricity prices. Expanded links to European electricity markets, official financing for gas and electricity reserves, increased domestic production, and energy efficiency measures have reduced dependence on Russian-linked energy sources. Fitch Ratings noted that Moldova's macroeconomic policy mix, including its commitment to inflation targeting and exchange rate flexibility, helped it weather external shocks. After the NBM raised its accounting rate by 290 basis points to 6.5% in January-February, the National Bank lowered it by 25 basis points in August as the risk of secondary effects from the shock of higher energy prices diminished. "We expect annual inflation to reach the NBM's target range (5% ±1.5%) by the end of 2025, with average annual inflation of 7.8% in 2025 before falling to 5.9% in 2026, which is above the projected median of 5% for a ‘B’ rating," according to Fitch Ratings. They predict that the current account deficit will increase to 17.6% of GDP in 2025 from 16% in 2024, as the impact of rising electricity imports and weak export demand will outweigh the continued growth in service exports. Experts believe that Moldova's high current account deficit should narrow, but it is likely to remain in the low double digits at 12.5% in 2027, as import demand related to public investment projects continues to weigh on it, despite export growth linked to the recovery of the agri-food sector, as well as the growth in the number of trading partners and service exports. Moldova's high current account deficit highlights the country's vulnerability to energy price shocks and reduced access to external financing. Experts point out that, as Moldova's current account deficit is only partially covered by low foreign direct investment (FDI) inflows (net FDI is projected to average 2.4% of GDP in 2026-2027), Fitch Ratings expects Moldova's net external debt, projected at 28% of GDP at the end of 2025, to continue to grow. Analysts note sufficient external liquidity and expect Moldova's international reserves, projected at $5.6 billion at the end of 2025, will provide relatively stable reserve coverage of 5.2 months of current external payments in 2026-2027, which is higher than the projected median value of “B” at 4.2 months, supported by official payments and generally balanced household supply and corporate demand in the domestic currency market. Experts predict that the external liquidity ratio (liquid external assets to short-term external liabilities) will be 208% in 2026, which will contribute to resilience to shocks. Analysts point to strong external support, noting that Moldova's pro-European government has been receiving ongoing financial and technical assistance since 2021. Moldova is close to completing the screening phase before starting negotiations on EU accession, and the EU has offered significant financial assistance (€250 million or 1.3% of GDP) to help the country cope with the shock of energy prices and reap the benefits of economic integration under a three-year Growth Program worth €1.9 billion (almost 10% of projected GDP for 2025), as well as providing greater access to the single market. Fitch Ratings analysts note the growth in the budget deficit and predict that Moldova's overall budget deficit will increase to 4.9% of GDP in 2025 from 3.9% in 2024, mainly due to increased spending related to the launch of the EU’s Reform and Growth Facility. Experts predict that the implementation of the Facility's expenditures related to sectoral reforms and investment projects will cause the budget deficit to remain temporarily high, averaging 5.1% of GDP in 2026-2027. The size of the budget deficit will depend on Moldova's ability to meet the Facility's reform benchmarks and implement investment projects. Fitch Ratings points to Moldova's moderate but growing public debt, forecasting that it will rise from 38.5% of GDP at the end of 2024 to 45.5% of GDP by 2027, approaching the projected median for the “B” category of 49.9%, reflecting a wider budget deficit and some moderate weakening of the MDL. About 62% of public debt is denominated in foreign currency, but these obligations are provided to official creditors and are mostly on concessional terms. The government has no external commercial debt. Interest expenses are relatively low and will amount to 1.6% of GDP or 4.5% of government revenue in 2025, which is below the median for category “B” of 12.9%. Fitch Ratings experts note that economic growth is beginning to recover. Lower inflation, energy support measures protecting households and businesses, and the expected recovery in agricultural production will lead to GDP growth of 1.4% in 2025, up from 0.1% in 2024. "We expect that further increases in real wages, growth in lending supported by additional easing of financing conditions and expansionary fiscal policy will lead to acceleration in GDP growth to 3% in 2026 and 4% in 2027. Reduced political uncertainty after the September parliamentary elections, stronger growth in countries with key trading partners, and accelerated implementation of investment projects related to the EU program may have a positive impact on growth prospects," according to Fitch Ratings. // 08.09.2025 – InfoMarket.
