Previous articles in this series:
A storefront isn’t a marketplace. But someone forgot to tell the regulator that
A storefront has no owner in the country that looks upon it
Something else will disappear: businesses’ working capital, apartment buyers, construction orders, families’ disposable income, and the ability of neighborhoods to maintain any kind of economic life at all.
This will be a crisis in which the financial system remains afloat precisely because the real economy will bear the full brunt of the collapse. Not the most obvious story for headlines, but it seems quite accurate.
Banking statistics look like a success story. That’s precisely the problem.
Take a look at the figures from the NBM report. In 2025, lending to the economy grew by 26.5%. Bank assets reached 190 billion lei. Bank profits totaled 4.93 billion lei, up 23.5% from the previous year. Return on equity was 16.9%. The share of non-performing loans remains around 4.1%. The capital adequacy ratio stood at 23.3%. The liquidity coverage ratio was nearly 300%, compared to a regulatory requirement of 100%.
Read this again slowly: this is not a banking system on the brink of a classic collapse. It is a very robust banking system within a very weak economy. And it is precisely this gap—between the health of the system and the health of what it serves—that will determine the nature of the next crisis.
Where exactly did all this credit expansion go?
Good question. In 2025, the mortgage portfolio grew by 40.2%, consumer lending by 30.4%, and trade financing by 25.7%. A total of 26.1 billion lei was issued for real estate purchases and construction, 19.2 billion for consumer spending, and 21.2 billion for trade. Taken together, these three sectors significantly outpace lending to industries that are creating a new productive base.
This does not mean that mortgages are evil, trade is useless, or that consumer loans are necessarily taken out out of desperation.
It means something else, something more mundane and more important: the financial system is most rapidly expanding demand for housing, imports, and current consumption, while productivity, the export base, and regional infrastructure are growing at a completely different pace—much more slowly.
Debt increases purchasing power right now. However, it does not generate the income needed to service that debt painlessly tomorrow. This is a rather fundamental difference, and it is precisely this that is usually left out of press releases.
June 2026 as a Case Study
I love it when macroeconomic statistics agree to be examined for a single specific month. In June 2026, banks issued 8.32 billion lei in new loans. Businesses received about 5.43 billion, and households—nearly 2.9 billion. Of the loans to individuals, 1.754 billion were for consumer spending and 1.114 billion were for real estate. The average interest rate on consumer loans was 10.64%, and on mortgages, 7.96%.
A note for sticklers (and I’m one of them): the monthly volume of new loans does not equal the increase in debt—some of the money simply refinances old obligations and supports current operations.
But the structure still reveals the key point: what exactly is sustaining demand in the country. Moldova is increasingly relying not on the results of expanded production, but on borrowing against the future income of households and businesses—that is, it is borrowing from its own future to finance the present.
Real Estate as the Perfect Mechanism for Converting Credit into Price Without Creating Value
This is where things get really interesting. The Prima Casă Plus government program, the interest rate cut in 2025, the concentration of the population in Chișinău, limited supply, and banks’ willingness to lend generously against collateral—all of these factors combined have driven prices upward.
The mechanism is a perfect vicious cycle: a rising apartment price allowed for a larger loan; a larger loan drove up the price of the next apartment; the developer saw the rising price and could comfortably take their time reducing their margin.
Everyone is happy as long as the cycle continues.
The problem is that real estate development is not just about square meters for sale. It involves land with infrastructure, a transportation network, utility systems, social amenities, and a solvent urban economy surrounding all of this.
In Moldova, buyer financing has effectively replaced actual area development: banks have consistently financed demand, the government hasn’t bothered to organize supply, and the gap between these two factors has resulted in rising prices.
This is not real estate market development. It is an imitation of it, complete with very convincing charts.
The cycle has already hit a wall
Apartment sales in Chisinau have plummeted—by more than half over the past year, according to various data sets. At the same time, asking prices in listings remain near historic highs. In the first quarter of 2026, investment in residential real estate fell by 13.5%, the volume of construction work dropped by approximately 12%, and new housing completions plummeted.
The market seems strange only to those who take the asking price in a listing as the actual price. The actual price is determined by the transaction, and transactions are becoming increasingly rare—which, in essence, is the most accurate definition of a falling market.
The NBM index, however, is based primarily on asking prices in Chisinau, so the statistics can calmly show price stability precisely when the market is losing liquidity. Sellers are not yet ready to lower their prices. Buyers can no longer purchase at the old price. Banks continue to value collateral based on yesterday’s market, because no one wants to revalue it right now.
This isn’t equilibrium—it’s a pause before a revaluation, one that has simply dragged on.
Who will actually pay for the correction (spoiler: not the bank)
The IMF estimates the cumulative revaluation of Moldovan housing at approximately 21–33%—with a clear caveat regarding the limited data, but the range is still telling. About 43% of all bank loans are directly or indirectly secured by real estate. At the same time, a stress test assuming a 30% drop in prices reduces total bank capital by only about 0.9 percentage points.
The conclusion drawn from these two figures side by side is rather unpleasant: even a severe correction in the real estate market, on its own, is unlikely to bring down the banking system. It will, however, erode homeowners’ equity, developers’ profit margins, the value of collateral, contractors’ revenue, and families’ ability to refinance.
The bank will weather a drop in apartment prices quite calmly. The family will continue to make payments on a loan that now exceeds the market value of that same apartment—and that will be the family’s problem, not the bank’s.
In 2008, governments had to bail out banks. In the Moldovan version, it seems the banks will be saved in advance—simply by the very structure of the requirements for capital, collateral, and borrower income.
The Big Picture: The country spends more than it earns and covers the difference with borrowing
Moldova imports significantly more than it exports, and consumer credit demand further fuels imports—after all, people take out loans not to save but to buy, and they often buy imported goods.
According to World Bank estimates, the current account deficit reached €3.55 billion in 2025—or about 19.6% of GDP—and will most likely remain at roughly the same extremely high level in 2026.
This gap can be covered for some time by reserves, remittances from migrant workers, subsidized loans, and EU funds. But ultimately, someone still has to pay for external balance—either through growth in exports and productivity (slow and difficult), or through currency depreciation, reduced imports, and lower domestic demand (quickly and painfully), or through new external debt (easily and conveniently right now).
For now, the country is choosing the third, most politically comfortable option: supporting consumption and the budget with external financing, hoping that reforms will be able to kick-start growth later on. It’s the classic “we’ll deal with it later” strategy, but on the scale of the balance of payments.
EU funds are not the same as development
An important caveat before you decide that EU aid is simply a good thing without any caveats. EU funds do indeed reduce the risk of a sudden sovereign default and provide an opportunity to finance infrastructure.
But money in and of itself is not development—this is a fairly obvious point that, for some reason, is regularly overlooked. If a country lacks well-prepared regional projects, an industrial policy, and a system for selecting investments and monitoring results, external funding simply gets siphoned off into equipment imports, consulting fees, operating expenses, individual construction projects, and the subsequent maintenance of what has already been built. This creates yet another debt or obligation—but not necessarily a source of revenue to cover that debt.
Particularly dangerous is the idea of addressing structural weaknesses simply by “expanding access to financing”—it sounds progressive, but it has the opposite effect.
When there are no productive projects or sales markets, additional cheap credit flows to areas where collateral is more straightforward and turnover is faster: real estate, trade, imports, and consumption. This is how development aid sometimes manages to accelerate the very financialization it was supposedly meant to combat.
Third Cycle: Inflation from Outside, a Brake from Within
After a brief easing, the National Bank raised the base rate to 6.5% in May 2026 and to 7% in June due to new energy and inflation risks. For an operating business, this means higher costs for working capital. For a developer, it means a more expensive project. For a family, it means more difficult refinancing and reduced spending.
Meanwhile, the energy shock strikes from a completely different angle: it raises the cost of production for almost everything without generating any additional domestic income in return. The central bank responds to imported inflation with the only tool at its disposal—expensive money—although, let’s be honest, a high interest rate produces neither gas, nor electricity, nor diesel.
As a result, the external price shock turns into a domestic investment crunch. Inflation doesn’t go away, and development faces yet another obstacle—a rather unfortunate combination, if you think about it.
Fourth Cycle: The Budget and Public Debt Are Interdependent
The budget deficit for 2026 is projected at around 5.7% of GDP, while social spending, energy subsidies, and infrastructure are all competing for the same limited resources.
As long as European funding arrives on schedule, the government can cushion the blow. But any delay in a tranche, a spike in energy prices, a poor harvest, or a decline in remittances from migrants will force a choice: raise taxes, cut benefits, or increase borrowing—all three options are equally unpleasant, just in different ways.
And here’s the detail I personally like best about this part of the story: the banks are already closely tied to the government. As of the end of 2024, domestic government securities accounted for 13.7% of bank assets and exceeded 100% of regulatory capital.
This does not in itself pose an immediate threat to solvency—but it does indicate a very close interdependence. The government supports the banks with regulations and liquidity. The banks finance the government. And the real economy pays both at once—through taxes and interest simultaneously.
How exactly this is likely to unfold
The most likely sequence looks something like this, step by step:
– Expensive loans and solvency constraints bring real estate transactions to a complete standstill;
– Developers scale back new projects; contractors lose orders; suppliers of materials and transportation lose revenue; the government loses VAT and taxes—a classic downward chain reaction throughout the entire supply chain;
– Declining employment and incomes reduce retail demand, although official statistics continue to cheerfully show growth in nominal wages and loans for some time (nominal growth and real well-being, I should remind you, are two different things);
– Families begin to cut back on everything except their bank payments—they are the last to stop making those payments, which is a fairly consistent pattern of human behavior;
– Small businesses are hit from two sides at once: revenue falls and working capital financing becomes more expensive;
– Delinquencies first rise among non-bank lenders and the most heavily indebted consumers, then spread to retail, construction, and agriculture;
– Banks are tightening lending—not because they’ve run out of money (they haven’t), but because they’ve run out of reliable borrowers and liquid collateral;
– The flow of credit, which had been driving prices upward for several years, is beginning to work in the opposite direction using the very same mechanisms.
Next come the exchange rate, the budget, and slow asset deflation
After that, the pressure shifts to the exchange rate and the budget. With a massive external deficit persisting, the weakening of the leu becomes a way to reduce imports and restore balance—but at the same time, it drives up prices for energy, equipment, and goods.
In other words, it cures one problem by causing the symptoms of another. The government will offset part of the impact with foreign aid, but will simultaneously be forced to step up tax collection and cut less essential spending.
Meanwhile, the real value of real estate declines before its nominal value does: apartments may continue to be “listed” in ads for the same number of euros as before for a long time, but they will sell less frequently, with larger actual discounts, and amid a decline in domestic goods and income—the gap between the price on paper and the price in reality is widening.
Then forced sales begin. This will not be a sudden collapse with a dramatic drop on the chart, but rather a protracted deflation of assets against the backdrop of everyday inflation—likely the most unpleasant combination possible for a family that owes the bank a fixed amount in lei, regardless of what’s happening to prices around them.
When exactly? No one knows, but the signs are already aligning
The timing of such a scenario cannot be set by decree—macroeconomics generally doesn’t play well with exact dates. With stable foreign aid tranches, a good harvest, and no new energy shock, the system can be stretched out over several years.
But the key elements have already aligned simultaneously, and that in itself is not the most encouraging sign: credit is growing by about a quarter annually, the housing market has shrunk, construction investment has declined, the external deficit is close to 20% of GDP, monetary policy is tightening again, and the financial sector’s profits are growing faster than the economy itself.
Over the next 12–24 months, the most likely scenario is not a banking collapse, but a growing crisis in debt servicing and domestic demand. The statistical indicator of this will not be a panic at ATMs—that’s too cinematic for this scenario—but rather the quiet convergence of three factors at once: a rise in delinquencies, a decline in new construction projects, and a drop in real retail sales after adjusting for credit and inflation.
Keep an eye on these three figures together—taken separately, each might seem like noise.
What can be done (and this isn’t “let the banks lend more to businesses”— that’s not enough)
A severe crisis can still be avoided, but simply calling on banks to lend more actively isn’t enough. We need to change the very purpose of the loans:
– government guarantees and preferential financing— for projects with measurable new output, exports, jobs, and infrastructure, not simply based on the presence of collateral;
– mortgage programs —link them to new housing supply and land-use planning; otherwise, the subsidy to the buyer quietly turns into income for the seller again, just with a different label;
– a registry of unfinished and planned construction projects, actual transaction prices instead of figures from listings, data on vacant housing, household debt burdens, and the regional structure of credit—that is, basic transparency, without which no one sees the problem until it is no longer a problem but a fact;
– for businesses —long-term modernization tools, working capital lines for exports, and restructuring mechanisms before bankruptcy, not just after;
– For the government: a rigorous selection of external financing projects based specifically on their ability to generate future revenue and reduce dependence on imports, rather than on the speed at which a tranche is disbursed.
The main mistake is to wait for a crisis in the same place where it happened last time
Moldovan banks are significantly more stable today than they were ten years ago—that is true, and it is even a welcome fact.
But a stable bank does not equal a stable economy, and that is the main point that is truly worth taking away from this entire text. The financial system is perfectly capable of collecting interest regularly in a country where manufacturing, construction, the population, and the planning horizon are all shrinking—one thing does not interfere with the other at all.
The next crisis will most likely look exactly like this: the bank will maintain its balance sheet, the government will retain access to foreign credit, and the apartment seller will keep a high asking price in the listing, while society will gradually lose its disposable income, its ability to invest, and a few more years of development—years that cannot be recovered later by a government meeting on a weekend.
This is the new type of crisis—without a dramatic explosion, but with a very costly future.
P.S. As usual, none of the above constitutes investment advice. Especially if you still believe that the price listed in an apartment ad is its actual price.
Dumitru Taraburca,
expert in real estate appraisal and development
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