Alexander Muravsky
According to preliminary data from the NBM, in the first quarter of 2025, the current account deficit of the balance of payments of the Republic of Moldova increased 2.3 times over the year, which is 25.8% in relation to GDP. This is more than $1 billion, while a year ago it was $447.72 million. Thus, the foreign trade balance is losing its stability, says economist Vladimir Golovatiuc.
“The balance of payments data fully confirm the conclusion about the increasing stagnation of our economy. The catastrophic shortage of domestically produced product means that the economy is increasingly living at the expense of the rest of the world,” says the economist. – The main reason for this situation is the record growth of the foreign trade deficit in goods – by 50%. Imports exceeded exports again by a record 3.4 times. A year ago – 2.4 times. Any impact will be enough to bring about a collapse”.
According to the expert, this means the possibility of a sudden crisis of the financial system, uncontrolled inflation, a sharp fall in the national currency, turbulence in the securities market, foreign exchange market, etc.
“By all criteria, a current account deficit of 25.8% of GDP is way beyond sustainability. A country with a current account deficit of more than 7% of GDP is considered to be potentially unsustainable. In our situation, any external or internal shock is enough to upset the balance of the country’s assets and liabilities. As it happened in the 1998 crisis, when the risks of financial instability materialized,” the expert says.
The massive shift is accompanied by the weakening of Moldova’s international investment position. As of 31.03.2025, it amounted to -$6,037.33 million (or 33.0% of GDP), having increased by 8.0%. The decrease in the position of external financial assets was affected by the decrease of commercial credits and advances – by 8.3%, reserve assets – by 0.8% and loans – by 5.5%. At the same time, portfolio investments recorded an increase by 25.2% (+$23.05 million), which is reflected in the dynamics of the position of non-resident securities in the portfolio of licensed banks from Moldova.
This divergence is accompanied by the reduction of currency sales by exporters, who already suffer from the exchange rate depreciation. The support of the leu exchange rate by exporters and remittances from abroad is weakening. The foreign exchange reserves accumulated in the past years, still comparable to 5-month export revenues, are not unlimited: the effect of using this reserve to stabilize the exchange rate of the national currency may not last long, analysts believe. After that, the leu won’t hold anything artificially.
Alexander Muravski, former Minister of Economy, believes that “we don’t feel it yet – the exchange rate is stable, the domestic market is full of goods, the fall of own production is compensated by the growth of imports, which increasingly exceeds exports. But imports require currency, the expert reminds, and due to the fall in exports and the reduction of receipts from our citizens working abroad, this currency is becoming less and less.
“What is holding us back? And what is holding us back so far is a significant foreign currency reserve accumulated by previous governments. Despite the huge amounts of foreign borrowings, currency reserves are systematically declining, ensuring the stability of the national currency to be able to pay debts more cheaply. And at this rate, the country will soon find itself in the deepest pit of the financial crisis,” says Alexander Muravsky.
GOODS: In the first quarter of 2025, the negative balance of foreign trade in goods, according to the balance of payments data, amounted to $1,625.72 million and increased year-on-year by 50%. The gap was driven by a 23.1% increase in imports (to $2,316.75 million), while merchandise exports fell 13.3% (to $691.03 million).
SERVICES: The foreign trade surplus in services totaled $200.20 million in the first quarter of 2025 and declined 4.8% over the year as a result of an 18.9% increase in imports (+$67.66 million), which exceeded the growth in exports (+$57.51 million). Services exports totaled $626.05 million and increased by 10.1%. The main contribution came from the IT sector, which increased by 19.6% to $181.61 million, or 29% of the total. Next is the export of tourism services, which increased by 7.5%, to $162.59 million.
GEOGRAPHY: Geographically, the decline in exports was due to a 19.4% (-$95.23 million) decrease in exports to the EU and a 24.5% (-$16.67 million) decrease in exports to the CIS. Exports to other countries increased by 2.4% (+$5.81 million). The largest negative contribution to the dynamics of total exports was made by exports of agro-food products, which decreased by 15.2% (-$68.69 million). This was due to a decrease in exports of fats and oils of animal or vegetable origin by 3.1 times (-$41.70 million), food products – by 17.5% (-$22.24 million), plant products – by 3.1% (-$7.85 million). Exports of live animals and animal products increased by 49.3% (+$3.10 million).
IMPORT: In the first quarter of 2025, the growth of imports was driven by the increase in shipments from EU countries – by 22.5% (+$277.85 million), from other countries – by 28.9% (+$165.40 million), while shipments from CIS countries decreased by 11.1% (-$8.41 million). In the structure of imports, the largest positive contribution – 12.7 p. p. – was made by supplies of mineral products (+$238.56 million), increasing by 85.2% over the year. Next are agro-food products, import of which increased by 13.3% (+$47.50 million), non-precious metals and articles thereof, import of which increased by 48.9% (+$42.91 million), vehicles and transport equipment – growth of 14.7% (+$37.69 million), machinery, apparatus and equipment – by 12.3% (+$37.15 million).
source: NBM
