Moldova Economic Outlook
Activity declined sharply in Q3 last year due to downturns in private consumption, investment and net exports. Turning to Q4, the economy likely remained weak. Activity suffered due to power shortages, which led to a more pronounced decline in industrial production in Q4 than in Q3. Moreover, export growth was muted, and inflation above 30% worsened the cost-of-living crisis. In Q1 of this year, moderating inflation and a recent rate cut from the Central Bank bode well for activity. Significant aid from Western countries and new financing from the IMF and EBRD, along with the recent electricity supply deal with Transnistria’s Cuciurgan power plant, do as well. In politics, the government resigned on 10 February, citing a lack of support. The new cabinet remains committed to deepening ties with the West and will focus on security amid the significant worsening of relations with Russia.
Moldova Inflation
Inflation decelerated to 27.3% in January (December: 30.2%). Despite likely remaining in double digits this year, price pressures are to lose significant steam ahead due to a strong base effect and lower commodity prices. The main upside risks remain the continued fallout from the war in Ukraine and the permanent cessation of Russian gas imports.