Among the factors cited is rising income, which has contributed to a further tightening of monetary policy.
Experts have their own views on the impact of these restraining factors and their influence on ongoing economic processes, as well as on blindly following classic precautionary measures.
In their view, Moldova’s economy in 2026 is not so much in a state of “overheating” (a classic boom and mass investment frenzy) as it is in a situation of imbalance between consumption and real production. We are “overheating” it through aggressive lending, real estate speculation, and dependence on imports, as confirmed by data from the National Bank of Moldova (NBM).
Risks of “overheating” have been mitigated
Increased inflationary pressure “both from the supply side, against the backdrop of unfavorable trends in international prices for energy, food, and raw materials, as well as from domestic demand, supported by favorable trends in household incomes,” according to the regulator, creates a dangerous trend of deviating from the target price growth range by the end of this year.
Annual inflation in May 2026 stood at 6.76% and was “partially offset by lower-than-expected growth rates in core inflation, food prices, and fuel prices.”
This does not diminish the inflation expectations of the NBM, which has revised its forecast downward, since the economy is not, by any stretch of the imagination, experiencing such a clear cooling of demand. This is how the central bank justifies its policy, presenting an overall picture of the current state of affairs.
Successes and Setbacks
In March 2026, industrial production increased by 12.3%, while retail and wholesale trade rose by 15.4% and 17.7%, respectively. At the same time, in January–April, the annual growth rate of exports stood at 10.9%, while the annual growth rate of imports rose by 5.7% compared to the same period last year. In the first quarter of 2026, the volume of freight transported increased by 15.1% year-over-year.
At the same time, the regulator notes a rise in domestic demand amid a decline in investment (we are consuming without creating long-term assets). From a consumption perspective, exports of goods and services, final consumption by households, and final consumption by the government all increased during this period, while gross fixed capital formation (economic activity) and imports of goods and services declined.
Regarding the sources of financing for consumption in the first quarter of 2026, the NBM notes an 11.6% increase in the wage bill in nominal terms, without taking real wage growth into account. Remittances from abroad to individuals in April of this year increased by 32.2% (in net terms) year-over-year.
The regulator also mentions rising demand for loans: in May 2026, the volume of new consumer loans issued to individuals in the national currency recorded a year-over-year increase of 14.2%, which is also counted as “income” that puts upward pressure on demand and acts as a pro-inflationary factor.
Even the regulator’s May decision to raise the base rate to 6.5% did not hinder the growth in lending. The situation in the money market led to an increase in the weighted average interest rates on new loans and deposits in lei.
We would cautiously suggest that even the implementation of the regulator’s June decision to raise the rate to 7% will not curb the public’s demand for consumer and mortgage loans.
“An increase in the base rate will lead to higher borrowing costs and higher yields on government bonds, which will affect both the population’s ability to pay and the government’s capacity to service its domestic debt. As early as May, yields on government securities began to rise. The yield on one-year government securities reached the 10% mark for the first time since June 2025,” says economist Vladimir Golovatiuc.
It’s not hard to calculate, the expert continues, that the Ministry of Finance will pay 8 million lei more for the government securities sold in June than it would have if the rate from early 2026 had remained in effect.
Over the course of a year, the cost of the rate increase will amount to approximately 200 million lei. “And that’s taking into account only the increase in yields in June, but the process won’t stop there. And that’s even without considering the rising sales of government securities,” says Vladimir Golovatiuc.
How the “Overheating” Is Forming
Despite stagnant real incomes, mortgage lending volumes have risen sharply in recent years, causing housing prices in Chisinau to rise by 30–35%. People are increasingly taking out loans not to actually improve their living conditions, but for investment purposes or to service existing debts, creating systemic risk.
Mortgage imbalances, along with household and business loans, have begun to outpace economic growth amid weak GDP. To prevent the sector from collapsing, the regulator has taken measures. According to experts, this is precisely why the NBM raised the base rate to 7% and increased the capital buffer for banks to balance the risks.
Consumer imports should not be overlooked either. Citizens receiving remittances and higher wages (the projected average wage for the economy is 17,400 lei) spend most of it on imported goods. This fuels price growth and widens the trade deficit.
The government is propping up the economy through large-scale social and infrastructure spending, which has led to a state budget deficit of more than 5.7 billion lei in just the first few months of the year. This generates additional inflationary pressure, and annual inflation remains at around 6.8–7%.
Feedback Loops, or What Drives Inflation
A high budget deficit is also a problem for monetary policy, according to Adrian Lupușor, executive director of Expert Grup.
“First, it represents an additional source of inflationary risk, especially in the context of a persistent structural deficit, such as in Moldova. Thus, in addition to other inflationary factors, monetary policy must take into account inflationary risks fueled by the budget deficit, which places additional pressure on monetary authorities and undermines the effectiveness of monetary policy. “Second, a high budget deficit, which leads to higher yields on government securities, undermines banks’ risk appetite,” says Adrian Lupuşor.
How does this happen? If lending to the government—which carries minimal risk—at interest rates of 9–10% is profitable, why would banks be interested in lending to the real sector at comparable interest rates?
“This explains the high level of liquidity in the banking system, which complicates the transmission channels of monetary policy decisions and forces the central bank to periodically sterilize excess liquidity in the system,” the expert explains.
Thus, while the real sector complains of limited access to bank credit, the NBM is forced to constantly sterilize excess liquidity in the system.
“This paradox points to a structural problem exacerbated by a persistent budget deficit. The irony is that the government, using the state budget, is also trying to implement state programs to facilitate the real sector’s access to bank loans,” Lupushor notes with surprise.
In other words, it won’t be possible to keep spending without creating value for long. The key question is not whether the government spends a lot, but whether it spends productively.
Moldova allocated an average of 3.4% of GDP to public investment during the 2010–2024 period and 3.3% of GDP during 2020–2024, which is one of the lowest figures in the region.
