Moldova Economic Forecast

After last year’s contraction, the economy has shown signs of improving so far this year. In Q1 versus Q4, inflation decelerated, interest rates fell and industrial activity declined at a slower pace. That said, exports grew less, weighing on output. Turning to Q2, inflation decelerated again in April, falling below 20% for the first time since February 2022. Moreover, the Central Bank cut the policy rate by 400 basis points to 10.00% in May and has now reduced rates by a cumulative 1,000 basis points since the start of the year, reducing pressure on activity. In politics, in late April the EU adopted new sanctions targeting Russian proxies in Moldova; on 15 May, Moldova announced its withdrawal from the Russian-led Inter-Parliamentary Assembly of the CIS; and on 21 May, over 75,000 Moldovans attended a rally in the capital, Chisinau, to support the country’s EU accession.

Inflation slowed to 18.1% in April (March: 22.0%). Inflation will decelerate this year due to significantly less reliance on Russian gas, a tougher base effect and the lagged impact of the past year’s aggressive monetary policy tightening. Volatile commodity prices and additional spillover from the war in Ukraine are upside risks.