Newsletter Issue 66 | July – August 2021

Moldova’s parliamentary elections – positive outlook

Parliamentary elections took place in Moldova on 11 July. PAS, a reformist party founded by President Maia Sandu, won 63 out of 101 seats – a sufficient majority to govern alone for the next four years. Subsequently, the new cabinet was voted in on 6 August, which is led by Natalia Gavrilita as prime minister, a Harvard graduate, and a former minister of finance in Maia Sandu’s government of 2019.


Newsletter Issue 65 | May – June 2021

Economic rebound despite political uncertainty

After a deep contraction of GDP amounting to 7.0% in 2020 due to the twin shocks of COVID-19 and the drought, the Moldovan economy is expected to rebound in 2021. Based on our macroeconomic model, we predict a growth rate of 4.8% for the year. Growth is driven mainly by a recovery of private consumption as well as exports.


Economic Monitor Issue 14 | June 2021


  • Political uncertainty continues ahead of the Parliamentary elections on 11 July
  • Economy is expected to rebound despite uncertainty: we forecast GDP growth of 4.8% for 2021
  • Growth to be driven mainly by strong consumption and export dynamic
  • Inflation remained stable throughout crisis, now slowly picking up and moving towards NBM target corridor; forecast for 2021 (average): 2.5%
  • Exchange rather stable throughout the COVID-crisis and higher FX reserves on the back of donor lending
  • Budget deficit to reach 4.0% of GDP in 2021, after 5.1% in 2020
  • EU just announced a very large recovery package for Moldova of EUR 600 m, including macro financial assistance, grants and investments

Policy Briefing 03/2021

Job-retention schemes and labour market adaptivity in the context of the Coronavirus crisis – Summary of results for Moldova


Newsletter Issue 64 | March – April 2021

Adjusting to FDI trends in the context of the pandemic

Investment is central to growth and sustainable development. However, current conditions are challenging, with global FDI declining in recent years and the severe impact of the COVID-19 pandemic on investment flows and global value chains (GVCs). At the same time, changes in investment patterns and the transformation of value chains that have been accelerated by the pandemic also open up opportunities for the development of Moldova’s economy. Those include attracting nearshoring projects and benefiting from a diversification and regionalisation of value and supply chains. In such a situation, it is of critical importance that investment attraction measures are as effective as possible. Tapping this potential requires a coherent and targeted approach, focusing on value chains that offer the most promising potential in light of the transformation process and utilising synergies between investment attraction and cluster development measures.


Newsletter Issue 63 | January – February 2021

After twin shocks: economy expected to recover in 2021

2020 was a challenging year for the Moldovan economy. In addition to the impacts of the COVID-19 crisis, the country was affected by a severe drought in the agricultural sector. Based on our macroeconomic model, we forecast a decline in GDP of 6.7% for 2020 – its deepest downturn in over a decade. Out of this, the agricultural sector accounts for one-third of the GDP decline. Besides agriculture, the economic decline was mainly driven by a sharp drop in private consumption. Despite announcing a range of fiscal stimulus measures, public spending actually went down in 2020, even though more options for external financing in the form of pandemic relief and emergency loans became available. Nevertheless, we predict that the economy will grow by 4.5% in 2021, as consumption and investments pick up. Meanwhile, the political future remains uncertain after PM Ion Chicu resigned and an interim government took over the responsibilities of the administration. In this situation, it remains unclear whether Moldova will receive external funding through a new IMF programme amounting to USD 558 m.


Economic Monitor Issue 13 | January 2021 (Update February 2021)


  • New President Maia Sandu took office on 24 Dec 2020; after the resignation of PM Ion Chicu, Aureliu Ciocoi was appointed acting PM; parliamentary elections expected in spring 2021
  • In 2020, Moldova’s economy suffered twin shocks with COVID-19 and a severe drought in the agricultural sector; we forecast GDP to decline by 6.7%
  • Recovery in 2021: GDP forecast to grow by 4.5%
  • Inflation remained within the National Bank’s target corridor in 2020; however, it is expected to decline to 1.8% in 2021
  • Budget deficit is expected to reach 5.4% of GDP in 2020, due to decreased revenues and increased expenditures; available sources of external financing (IMF, EU) only partially used

Newsletter Issue 62 | November – December 2020

Drought-hit agriculture sector slows economic recovery

Agriculture is one of the economic sectors that have been less severely affected by the COVID-19 pandemic. Thus, it could be excepted that it would have a stabilizing effect on economies with large agricultural sectors such as Moldova, where agriculture accounts for 11% of GDP. Unfortunately, a stabilizing effect could not be achieved due to a severe drought that hit the country in the first half of the year. The effects of this have become visible in Q3 2020, which includes the harvesting season and when output in agriculture dropped by 31%. The crops worst affected by this drought, corn, soybeans, sunflower, wheat and grapes, are among the most important agricultural exports. Considering that agricultural and food products make up 40% of Moldova’s exports, this has a large impact on the economy as a whole. Based on the size of the agricultural sector and its predicted overall decline of 27% in 2020, we estimate that the drought would have a negative effect on GDP in the range of 2 to 3 percentage points. It is therefore clear that instead of finding stability in agriculture, Moldova suffered from a double shock in 2020 with COVID-19 and the drought.


Policy Briefing 04/2020

European Competition Network (ECN) Plus Directive. Implementation in Germany and its application to digital trade & online platforms


Newsletter Issue 60 | July – August 2020

Transnistria’s economy during the Corona crisis

The Transnistrian economy entered 2020 on a relatively strong footing. Metal exports and electricity production – the two main sectors – showed high growth after trade restrictions for metals were lifted and a new electricity contract with Chisinau was signed. However, the Corona crisis put an end to the economic upswing. Very strict containment measures, a collapse of remittances and external demand have led to a severe recession. To make matters worse, the fiscal situation, which was already strained before the crisis, means that there is little room for additional public spending. With no help from monetary policy – which is focussed on maintaining the fixed exchange rate – and no access to external financial assistance, GDP is estimated to decline by 11% in 2020. While the crisis has been contained so far, it becomes obvious that the Transnistrian economic model is in need for fundamental reform in order to improve access to foreign markets and international payment channels.


Newsletter Issue 59 | May – June 2020

Moldova’s banking sector in light of COVID-19

In 2014/2015 the Moldovan banking sector experienced a deep shock following the banking fraud and money laundering scandal. The government was forced to recapitalize the three major banks with approximately USD 1 bn and enact comprehensive reforms. Today – five years later – the Moldovan banking sector appears to be stronger and confidence of consumers, international financial institutions and foreign correspondent banks has returned. This is visible in Western and Eastern European investors’ increased shareholdings in the four leading banks. In addition, and in contrast to 2014/2015, the Moldovan banking sector has made significant progress in respect to indicators such as capital adequacy, earnings performance, liquidity, non-performing loans and credit growth. As such, the banking sector appears in relatively good shape in light of the expected COVID-19 impact.


Economic Monitor Issue 12 | June 2020


  • We forecast GDP to decline by 6.3% in 2020 due to Corona crisis fall-out – deeper recession than after global financial crisis
  • Consumption, investments and exports all expected to decline; lower imports and higher government spending mitigate the negative effect on GDP
  • Economy to recover strongly by 5.5% in 2021
  • Inflation to decline to 1.3% in 2020 (after 4.8% in 2019) as economy runs below capacity
  • As such, monetary policy rate expected to decline further and to remain low for the foreseeable future
  • Exchange rate holding up so far amidst support by National Bank, but moderate depreciation possible in 2020 as economy opens up again
  • Increasing public expenditures and falling revenues results in a budget deficit of 5.4% this year – assuming the government can access external assistance

Newsletter Issue 58 | March – April 2020

The economic impact of the Corona crisis in Moldova

Amidst the global pandemic caused by the Corona virus, the government of Moldova was forced to enact strict containment measures in order to avert a public health crisis. While there are tentative signs that the spread of the virus is slowing, the toll on the economy is likely to be drastic.


Newsletter Issue 57 | January – February 2020

Robust growth in 2019 despite political instability

The Moldovan economy grew by an estimated 4.2% in 2019, which is comparable to previous years. Growth was primarily driven by investments which increased by around 16%. Amidst buoyant investment activity, the construction sector showed the highest growth rate among the main sectors of the economy, increasing by 19% in 2019.


Economic Monitor Issue 11 | January 2020


  • New government. Socialist minority government still has to prove its commitment to reforms
  • Improving the business climate. Proposals in cooperation with the European Business Association
  • Reform concept for the Investment Promotion Agency. To make the Investment Promotion Agency more efficient, a target group-oriented approach should be followed
  • Intercity bus market in Moldova. A strategic planning process is required, which should include an integrated mobility master plan

Newsletter Issue 56 | November – December 2019

Change of government in Moldova, again

Maia Sandu’s government was dismissed in a no-confidence vote on 12 November, after her government assumed responsibility for a bill that would have put the Prime Minister in charge of the short-list of candidates for the Prosecutor General. This proved to be a no-go for her coalition partner, the Socialists Party, who were long insisting on a government reset. A new cabinet was appointed two days later, with the support of the weakened, but still numerous Democratic Party. Moldova’s Western partners expressed worry, reiterated the need to fight corruption, but said cooperation would continue based on principles of conditionality and respect for rule of law.


Newsletter Issue 55 | September – October 2019

Current economic situation: investment-driven growth

Economic growth is expected to reach 4.2% in 2019, thus surpassing earlier forecasts. The main reason for high growth is the strong increase of investment by over 20% in the first half of 2019. This development is reflected by an expansion in the construction sector, which grew by ca. 27%.


Economic Monitor Issue 10 | September 2019


  • The new government. Big challenges ahead for the unusual coalition of pro-Russian Socialists and pro-EU block ACUM
  • Economic effects of the DCFTA. After 5 years of implementation we see a strong positive effect on exports to EU
  • Reorientation of Moldovan Investment Promotion Agency. The reorganization also requires an adaptation of tasks and processes

Policy Briefing 03/2019

EU tariff rate quotas and anti-circumvention trigger volumes for Moldovan products: Setting priorities for possible increases


Newsletter Issue 54 | July – August 2019

Moldova’s new government – a country less divided, for now

An unlikely coalition was formed between the pro-Russian Socialists and the pro-EU ACUM bloc, after what looked like a geopolitical consensus between the USA, EU and Russia to oust Vladimir Plahotniuc, who had crossed too many lines lately.


Newsletter Issue 53 | May – June 2019

The effect of the DCFTA on Moldovan exports to the EU

Moldova signed a deep and comprehensive free trade agreement (DCFTA) with the EU in 2014, which came into force in the same year. After almost five years of implementation, we analyse the impact of the DCFTA on Moldovan exports to the EU.


Newsletter Issue 52 | March – April 2019

Household over-indebtedness with micro-financial institutions

The German Economic Team Moldova together with the National Commission for Financial Markets has collected data on household over-indebtedness with micro-financial institutions. Although the data in our sample is probably only an approximation of the actual situation, it is closing an information gap.


Newsletter Issue 51 | January – February 2019

Parliamentary elections in Moldova – what to expect?

Parliamentary elections are set to take place in Moldova on February 24th. Similar to prior elections the government introduced new rules, which are supposed to influence the results somewhat. Among others, there is a new electoral system and the possibility to have referendums on election day.


Economic Monitor Issue 9 | January 2019


  • Monetary policy normalisation in leading economies. So far no impact on Moldova, due to low foreign debt and prudent policy in recent years; nevertheless need to be cautious
  • Perspectives of agricultural insurance. Current system had only limited success, we recommend a simple alternative or a gradual reform
  • Household over-indebtedness. Some microfinance institutions contribute to increasing household over-indebtedness through irresponsible lending
  • Effect of the DCFTA. Strong exports growth to the EU, higher FDI from EU

Newsletter Issue No. 50 | November – December 2018

Economic situation at the end of the year

Economic growth will amount to a good 4% in 2018. A slight slowdown is expected for 2019; GDP is forecasted to grow by 3.8%. Growth is driven by con-sumption and investment. On the supply side, manufacturing, construction and retail trade are contributing to growth; agriculture stagnates.


Newsletter Issue No. 49 | September – October 2018

Monetary policy normalisation and its impact on Moldova

In response to the international financial crisis in 2007/2008, central banks in advanced economies reacted heavily and cut their policy rates to unprecedented low levels. This ultra accommodative policy had its intended impact, but now it poses severe risks of asset bubbles. Thus, leading central banks have started to normalise their policy.


Newsletter Issue No. 48 | July – August 2018

Stable situation, but growth not high enough

The Moldovan economy grew by 4.5% in 2017. For the current year, it is expected to grow by only 3.8%. Just like in 2017, private consumption is the primary growth driver on the demand side, while the supplyside it is retail sales and manufacturing.


Economic Monitor Issue 8 | June 2018


  • Exports development. EU market remains the key driver for Moldovan exports. EU direct investment boosts exports from the automotive sector (esp. wiring harness)
  • EU tariff rate quotas. Recommendation to increase quotas for grapes and plums
  • Transparency of consumer loans. Intransparent use of the annual percentage rate of charge for consumer loans. Legal framework and supervision should be strengthened

Newsletter Issue No. 47 | May – June 2018

Transnistria: uncertain economic outlook

The Transnistrian economy has been in crisis mode for many years due to the undiversified structure of the economy and the precarious state of the public finances. The industrial sector, which accounts for about 30% of Transnistrian GDP, is dominated by only two companies: steel producer MMZ and the electricity plant Moldavskaya GRES. A decline in the output of either company usually results in protracted recessions. To make matters worse, an economic slowdown in the industrial sector is typically aggravated by public sector spending cuts as the large budget deficit of 23% of GDP leaves no room to compensate any revenue short-falls.


Policy Paper 01/2018

Increasing consumer loan transparency: The role of the annual percentage rate of charge

Transparency in advertising of consumer loans is not only important for consumer protection reasons, but also for the stability of the financial sector. The average percentage rate of charge (APR) is, in this regard, a highly useful tool as it includes all the costs of a credit and expresses them in a single number, thus makes different loan offers easily comparable for borrowers. In this policy paper we analyse the transparency situation in the Moldovan consumer credit market with a focus on appropriate use of the APR in advertising.


Newsletter Issue No. 46 | March – April 2018

Positive development of Moldovan exports in 2017

Moldovan exports have developed positively in 2017; they went up by 18% yoy. Exports to the EU have increased above average, thus contributing 70% to the export expansion. Also, exports to Turkey and Ukraine increased above average. Export growth to Belarus and Russia was only moderate, despite the economic recovery in both countries.


Newsletter Issue No. 45 | January – February 2018

Stable growth on a moderate level

The economy grew by 3.5% in 2017, which is less than in the previous year. The primary reason for this lies in the lower growth rate of the agricultural sector. On the demand side the economy was supported by private consumption, which was enabled by increasing real wages and by resurging remittances. Inflation increased to 6.6% in 2017, which was also influenced by one-off effects. During the year, the Leu has appreciated by ca. 15% vs the US dollar, which reflects the favourable external economic position. The budget deficit was at 3.1% of GDP in 2017 and thus lower than expected, which is related especially to increased tax revenues.


Economic Monitor Issue 7 | January 2018


  • Banking sector. Stabilisation reached after banking fraud, crediting of the private sector still decreasing
  • Foreign direct investment. Role of FDI for the economy so far underestimated, as a study of GET Moldova has shown
  • Economic reforms. Comprehensive reforms to be assessed positively; too early for final assessment
  • Increasing tax revenues. Increase in tax revenues can at least partly be attributed to reforms; positive example for structural reforms

Policy Paper 03/2017

Potentials and Key Features of Pilot-Cluster Structures in the Automotive Supply and TAFL (Textile, Apparel, Footwear and Leather Goods) Industry in Moldova


Economic Monitor Issue 6 | June 2017


  • Cluster development. The creation of clusters can contribute to industrial development and FDI attraction
  • External trade. Extension of trade with CIS is desirable, but should not happen at the expense of trade with the EU; criticism of the DCFTA is unfounded
  • Banking sector. Recommendations how to absorb excess liquidity in the banking sector