The European Commission has lowered its GDP growth forecast for Moldova in 2025 from 3.8% to 0.9% and in 2026 from 4.2% to 2.8%
This is stated in its new Spring 2025 Economic Forecast. It notes that Moldova's economic recovery stalled in 2024 (GDP growth was 0.1%) due to another poor harvest and the associated decline in demand for transport services. Although these factors will continue to weigh on real GDP growth in the first half of 2025, along with the resumption of the energy price crisis, growth is projected to gradually recover. EC experts believe that private consumption growth will remain robust, driven by real wage growth. Although tighter monetary policy and rising energy prices are expected to slow investment growth, public investment is expected to pick up in 2026, supported by EU financial assistance from the new Reform and Growth Facility. Moldova's budget deficit is projected to increase in 2025-2026 due to expected growth-stimulating expenditures supported by the Facility’s resources, while the debt-to-GDP ratio is expected to rise over the forecast horizon. EC experts explain that Moldova's economic recovery, which began in 2023, stalled in the second half of 2024, primarily due to a sharp decline in agricultural production following the summer drought. The downturn remained moderate thanks to a recovery in private consumption, supported by real wage growth, as well as strong investment growth driven by a more accommodative monetary policy and a program to support real estate investment. European Commission experts believe that Moldova's real GDP growth should recover slowly over the forecast period as the slowdown caused by the poor harvest in 2024 fades and domestic demand is expected to remain strong. Employment recovery and higher real incomes, also due to government compensation measures protecting consumers from some of the impact of energy price increases, are projected to continue to stimulate private consumption in 2025 and 2026. Investment growth is expected to slow in 2025 as higher energy prices weigh on business sentiment, before strengthening in 2026 on the back of strong government investment supported by the Reform and Growth Facility. Net exports are expected to continue to weigh on growth in 2025-2026, although their negative impact is expected to weaken. Exports declined as a result of weaker growth among key trading partners, a summer drought that affected agricultural production, and a decline in re-exports to Ukraine in 2024, which should reach pre-2022 levels by 2026. Growing exports of services, mainly from the expanding ICT and tourism sectors, and the expected recovery of agricultural exports should support net exports in 2025-2026. Imports are projected to continue growing due to sustained high domestic demand and a sharp increase in electricity imports following the cessation of Russian gas supplies to the Transnistrian region. Short-term downside risks remain high, particularly those related to climate and geopolitical uncertainty. Real wages continued to grow in the second half of 2024, mainly due to lower inflation, albeit at a slower pace. Until 2026, they are expected to be boosted by higher public sector wages and the minimum wage, as well as the continuing labor shortage. Pension indexation should also support household incomes, while electricity compensation payments help offset higher electricity costs. Both employment and labor force participation declined in the second half of 2024, primarily due to the negative impact of the summer drought on agriculture. However, policies supporting women's participation in all sectors have mitigated the impact on female employment. Overall employment growth is expected to recover in 2025 and remain stable in 2026 as agriculture recovers and economic growth strengthens. European Commission experts note that after a period of disinflation, inflation averaged 3.9% in the first half of 2024, but picked up again in the second half of the year due to higher food prices, partly explained by the drought in the summer of 2024 and rising energy prices. Constantly rising energy prices led to an increase in annual inflation to 8.75% in March 2025. In response to rising inflation, the NBM tightened monetary policy in early 2025, raising the base rate to 6.5% in February 2025. Inflation is projected to remain above the central bank's target range of 5% ± 1.5% in 2025, but to decline again by the end of 2025. However, risks related to the price effects of energy imports and further volatility in food prices remain elevated. The current account deficit will remain large and the fiscal deficit will increase. The current account deficit is expected to remain elevated. The trade deficit will remain negative due to the country's weak export base, its dependence on energy imports, and a sharp increase in electricity imports following the cessation of electricity supplies from the Transnistrian region. Remittances are projected to remain high, although they will show a steady downward trend despite continued emigration, primarily due to growing family reunification abroad. Increased foreign financing flows due to recent energy support from the EU and the Reform and Growth Facility should support external financing needs. The fiscal deficit-to-GDP ratio is projected to fall below 4% in 2024, lower than initially projected, primarily due to higher-than-expected revenues and lower-than-planned government investment. In 2025, the deficit is projected to increase to 5% due to higher public wages and higher current and capital expenditures, supported by additional financing from the Reform and Growth Facility. Revenue growth, supported by a gradual economic recovery, is projected to continue but at a slower pace than expenditure growth as a share of GDP. Public debt is expected to rise to 40.9% of GDP in 2026, mainly due to higher fiscal deficits associated with additional financing under the Reform and Growth Facility. Earlier, it was reported that the European Bank for Reconstruction and Development had lowered its GDP growth forecast for Moldova in 2025 from 2% to 1.8%, but kept its forecast for 2026 at 3.8%. The World Bank has lowered its GDP growth forecast for Moldova in 2025 from 3.9% to 0.9% and in 2026 from 4.5% to 2.4%. The IMF has lowered its GDP growth forecast for Moldova in 2025 from 3.7% to 0.6%. At the same time, the Fund's experts forecast Moldova's economic growth at 2.5% for 2026 and 5% for the end of the next five-year period (2030). The Ministry of Economic Development and Digitalization forecasts 2% growth for Moldova's economy in 2025 and 2.4% in 2026. // 20.05.2025 — InfoMarket
