EU Commission cuts Moldova's 2024 GDP growth f’cast to 2.9%

In 2025, the EU candidate country's gross domestic product (GDP) growth is expected to pick up to 3.7%, revised downwards from 4.2% in the previous forecast, the Commission said in its May 2024 Economic Forecast published on Wednesday.

"Following a year and a half of economic contraction triggered by both the Russian war of aggression against Ukraine and a severe drought, Moldova’s nascent economic recovery began in the second half of 2023 and is expected to strengthen in 2024 and 2025," the EU executive said.

Continued employment growth and rising real wages and pensions will continue supporting a rise in private consumption in 2024 and 2025, while investment growth is expected to be supported by looser monetary policy. However, investment growth is set to be moderate this year due to subdued business sentiment and lower planned public investment, before picking up in 2025 as a result of a sharp increase in planned public investment.

Last week, Moldova's central bank said it has decided to cut its key rate to 3.6% from 3.75% to stimulate the economy amid slowing inflation. The statistical office said that Moldova's consumer prices rose by 3.5% year-on-year in April, decelerating from a 3.9% annual increase in March.

"Inflation is projected to remain within the target range over the forecast period, though is expected to rise slightly towards the end of 2024 and into 2025 on the back of increased administrative prices for healthcare and fuel tariffs. However, risks related to Moldova’s energy security and thus import price volatility remain, despite the country’s recent efforts to reduce its dependence on imports of Russian natural gas," the Commission noted.

The Commission also said it revised downwards its estimate for Moldova's GDP growth in 2023 to 0.7%, slashing 1 percentage point off its November forecast.

In the European Union, GDP is expected to grow by 1% in 2024 and expand by 1.6% in 2025, while the Euro area's economic growth is projected at 0.8% and 1.4% in 2024 and 2025, respectively.