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Arthur Metzger, Alina Kunde

Investment-led growth in Moldova after two years of stagnation

2025 was the first year of noticeable economic growth after two years of stagnation. Despite the energy shock at the beginning of the year, which temporarily pushed up inflation, the economy grew by 2.4%, driven by rising investment. This surge came alongside government schemes supporting investment. Private consumption also made a solid contribution to growth, while net exports continued to drag. Investment is expected to remain a key driver of economic growth in 2026, with forecasts ranging from 2.3% to 3.0%, not yet accounting for potential negative effects from the current Middle East conflict. Moldova’s current account deficit remains structurally high, the stability of the leu and the central bank’s reserve position suggest that the real deficit may be smaller. In our view, the main reason is the underreporting of cash remittance inflows. In 2026, the public budget deficit is expected to widen to 5.7% of GDP due to higher capital expenditure, although uncertainty remains over how much of the planned investment will be implemented.

  • Moldova
NL 94 | March - April 2026
Macroeconomic Analyses and Forecasting
Investment-led growth

After two years of stagnation, Moldova’s economy grew by 2.4% in 2025. This development is primarily driven by a rise in investment and supported by stronger private consumption. Strong investment growth helped to counteract the negative effects of an energy shock at the beginning of the year, which had lowered initial forecasts. The shock led to higher import volumes of natural gas and electricity, partly because electricity was no longer being purchased from the TN region. This, in turn, had a negative impact on net exports.

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While investment had already started to recover in 2024 after a sharp decline in 2022/2023, it increased significantly in 2025. Investment grew by 22% yoy and contributed 4.6 pp to GDP growth. This increase was broad-based across all types of investment (machines, buildings, etc.). The change in profit taxation for SMEs in 2023 played likely a key role. Previously, annual profits were taxed at 12% and upon distribution again at 6%. The new system exempts reinvested profits from taxation and taxes only distributed profits at a rate of 18%. Initially, this scheme should have applied to the years 2023-2025, but it was extended until the end of 2026 and may be prolonged further.

Investment is expected to remain a key driver of economic growth in 2026. The IMF projects GDP growth of around 2.3%, with the Growth Plan being a major factor supporting investment. In addition, the government introduced a regional state aid scheme running from 2025 to 2028, which is expected to support investment in the coming years. This scheme allows firms, investing in strategic sectors of manufacturing, to recover substantial parts of their investments. The refund is higher when the firm is small, and investment occurs outside the capital region. To date, a total of EUR 100 m has been allocated to this scheme through 2028.

Inflation

After inflation remained close to the 5% target corridor in 2024, the energy shock in early 2025 pushed inflation up to 9.1% in Jan-25. In response, the National Bank of Moldova (NBM) raised the policy rate to 6.5%. Over the year, there was gradual disinflation, which was accompanied by modest policy rate cuts. In Feb-26, the inflation rate has returned to the NBMs tolerance band. Currently, new inflationary risks emerge due to external shocks. On 24 March, the Parliament approved a 60-day energy state of emergency after Russian attacks on Ukraine disrupted the Isaccea-Vulcănești line, through which electricity is transmitted from Romania to Moldova. Prolonged disruption may push up electricity import prices. Moreover, the current Middle East conflict already gives rise to oil and gas price hikes, which increase costs of fuel, fertilisers and food. Further, inflationary effects will depend on the conflict’s duration.

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Current account

Traditionally, Moldova has a large current account deficit (CAD) that in recent years varied between 11% and 17%. In 9M2025, the CAD reached 19.4% of GDP due to an increase in electricity imports and higher prices for gas imports following the energy shock.

Normally, a persistent CAD of this size would lead to excess demand for foreign exchange (FX) and thus put pressure on the exchange rate and the FX reserves of the central bank. However, in recent years the MDL/EUR rate has remained stable, while the NBM’s FX reserves have increased. In our view, this paradox arises because cash remittances flowing into Moldova are underestimated. In case of higher remittances, the CAD would be lower (i.e. single digit in % of GDP).

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Public budget

For 2026, a fiscal deficit of 5.7% of GDP is planned, a substantial increase from 3.9% of GDP in 2025. The wider deficit reflects a strong scale-up in capital expenditure to 4.3% of GDP, supported by the Growth Plan. However, persistent under-execution of investment projects raises doubts about how much of this spending can be implemented. Against this background, the IMF projects a lower fiscal deficit of 4.8% of GDP for 2026, which still exceeds the level of the previous year.

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Outlook

Moldova’s economy is growing again, partly due to external financial support under the Growth Plan. In the short term, this support helps stimulate investment, however, over the medium to long term Moldova will need to shift from reliance on public funding towards mobilising private capital and attracting more investment. This will require a strong policy focus on improving the business climate and increasing FDI inflows, which remain low. Current plans for tax reforms could support this shift by improving the country’s competitiveness.

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This newsletter is based on the 23rd issue of our Economic Monitor Moldova.

Sources

About the German Economic Team

The German Economic Team is financed by the Federal Ministry for Economic Affairs and Energy (BMWE). Berlin Economics is commissioned with the project implementation.