Moody’s maintains Moldova’s B3 ratings, stable outlook

Investing.com -- Moody’s Ratings has reaffirmed the B3 long-term issuer ratings of the Government of Moldova, both for foreign and domestic currency. The outlook remains stable, according to the announcement made on April 25, 2025.

The affirmation of Moldova’s B3 ratings takes into account the country’s high exposure to geopolitical risk due to the ongoing conflict in neighboring Ukraine. This risk is balanced by improvements in the country’s institutions and governance strength driven by institutional reforms in the context of the EU accession process.

The ratings also consider the EU-funded Reform and Growth Facility for Moldova, which is expected to boost the country’s currently weak rate of economic growth and support long-term growth potential. However, the facility, which is mostly loan-funded, will also increase the government’s debt burden.

The stable outlook reflects balanced risks at the B3 level. On the upside, continued progress on reforms tied to the EU accession process could lead to improvements to institutional strength beyond current expectations and bolster Moldova’s economic strength. On the downside, the upcoming parliamentary elections in the fall could result in a more fragmented government or one less committed to the EU accession process, potentially hampering further institutional and economic reform.

The geopolitical risk from the US disengaging from its role of supporting Ukraine and European security could also have negative effects on Moldova. Both these factors could harm the prospects for a sustained recovery of the Moldovan economy, which has struggled to grow since 2022.

Moody’s has kept Moldova’s local and foreign-currency ceilings unchanged at Ba3 and B2, respectively. The three-notch gap between the local-currency ceiling and the sovereign rating reflects elevated political risks, somewhat elevated external vulnerabilities, and moderate predictability of government and institutions. The two-notch gap between the foreign-currency ceiling and the local-currency ceiling reflects very limited capital-account openness, weak policy effectiveness, and somewhat elevated external indebtedness.

Moody’s has identified several factors that could lead to an upgrade or downgrade of the ratings. Positive pressure could build on Moldova’s ratings from a combination of a lowering of political risk and further improvements to institutional and economic strength. The ongoing EU accession process could drive a strengthening of Moldova’s institutions and governance strength beyond current expectations in coming years.

However, if the geopolitical risks stemming from Russia’s invasion of Ukraine or Russian interventionism through hybrid attacks were to escalate into domestic instability in Moldova, Moldova’s outlook could change to negative and its ratings could eventually be downgraded. Evidence of increased domestic political volatility, including a weakening in the government’s commitment towards EU accession, which jeopardises international financial support and leads to a reversal in reforms, would be negative for the ratings. A significant weakening of the government’s fiscal strength could also add to downward pressures.

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