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Investing.com -- On Friday, Fitch Ratings confirmed Moldova’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ’B+’ with a Stable Outlook. The rating agency highlighted Moldova’s commitment to policies that have maintained macroeconomic and financial stability, despite potential destabilizing shocks.
The ’B+’ rating also takes into account Moldova’s low government debt, manageable debt repayment profile, and availability of external financial support. However, the small Moldovan economy is highly exposed to geopolitical risks due to the ongoing conflict in neighboring Ukraine and potential foreign interference in domestic politics.
In 2024, President Maia Sandu secured a second term, and the nation narrowly passed a referendum to include the objective of joining the EU in its constitution. Parliamentary elections are set to occur by July 2025, and the risk of external interference is high.
Moldova’s current account deficit (CAD) was estimated to have expanded to 16% of GDP in 2024 due to a weak export performance, lower remittances, and an increase in imports. Fitch forecasts the CAD to remain high at 13.9% of GDP in 2025, due to a sluggish recovery in Europe and higher electricity imports.
Despite these challenges, Moldova has robust external liquidity buffers. Gross international reserves reached USD5.5 billion at the end of 2024. Official financing availability is expected to maintain reserve coverage at 5.2 months of current external payments in 2025-2026, above the projected ’B’ median of 4.2.
Since 2021, Moldova’s pro-European government has received continued financial and technical support. The EU has offered significant financial aid to help Moldova manage the energy price shock and advance the benefits of economic integration.
Moldova’s general government deficit narrowed to 3.9% of GDP in 2024 due to robust revenue growth and lower-than-budgeted spending. However, the implementation of the EU’s Growth Facility could lead to temporary higher deficits averaging 4.8% of GDP in 2025-2026.
Moldova’s general government debt is estimated at 38.5% of GDP at the end of 2024, lower than the projected ’B’ median of 50%. Yet, it is expected to approach 43% by 2026.
Moldova has faced a third energy shock since 2021, as the supply of Russian gas to Transnistria was interrupted, affecting the country’s electricity supply. However, improved external buffers and availability of external financing and alternative energy imports helped Moldova avoid significant disruptions beyond higher electricity prices.
Inflation accelerated to 9% year-on-year in January due to adjustments to gas, electricity, and heating tariffs combined with higher prices for certain food products. Fitch projects annual inflation to average 9.5% in 2025, up from 4.7% in 2024.
Moldova’s macroeconomic policy mix, including a credible commitment to inflation targeting and exchange rate flexibility, has supported its capacity to navigate external shocks. The National Bank of Moldova (NBM) hiked its policy rate by 290 basis points to 6.5% in January-February in response to the energy price shock.
Moldova’s GDP growth has been negatively affected by a series of energy and geopolitical shocks in recent years. GDP growth was estimated at 0.1% in 2024 and is forecasted at 1.7% in 2025.
The Country Ceiling for Moldova is ’B+’, in line with the LT FC IDR. This indicates no significant constraints and incentives against capital or exchange controls that would prevent or significantly impede the private sector from converting local currency into foreign currency and transferring the proceeds to non-resident creditors to service debt payments.
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