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Moldova’s Economic Performance Strong Amid Multiple Crises

Washington D.C., July 2022 - Moldova’s economic performance has been strong, despite being buffeted by multiple crises, including the ongoing war in Ukraine and COVID-19 pandemic.

Meeting Quantitative Criteria

According to an International Monetary Fund (IMF) report released today, Moldova has met all its quantitative performance criteria and indicative targets for end-June 2022. The country’s fiscal revenues have been robust, driven by inflationary pressures and strong corporate income tax collection.

Fiscal Performance

The fiscal deficit contracted to 1.2 percent of GDP in the first half of 2022, with revenue growth exceeding expenditure growth. However, risks on expenditure are high and likely to surpass positive developments on the revenue side, requiring additional temporary fiscal support for households and businesses.

Inflation and Structural Benchmarks

Inflation surged to 31.8 percent year-on-year in June, driven by energy and food price increases, but remained within the outer band of the inflation consultation band. Structural benchmarks were also met, including:

• Publication of a comprehensive tax expenditure analysis
• Expansion of a staff registry to all central government employees

Governance and Institutional Reforms

The IMF report emphasizes the need for Moldova to push forward with governance and institutional reform priorities identified under the Economic Cooperation Framework (ECF) and Extended Fund Facility (EFF) arrangements approved in December 2021. The war has underscored the relevance of these structural reforms, which are critical to increasing Moldova’s resilience to shocks.

Importance of Central Bank Independence

The report also highlights the importance of central bank independence in signaling credibility and achieving policy objectives in a highly uncertain environment.

Conclusion

Overall, the IMF report concludes that Moldova’s economic performance has been strong, but that the country must continue to implement structural reforms to increase its resilience to shocks and build trust in public institutions. As an IMF spokesperson noted:

“Moldova faces significant challenges in the current environment, including multiple crises and ongoing uncertainty. However, the country has shown strong economic performance so far this year, and we believe that pushing forward with governance and institutional reform priorities will be crucial for building resilience and preserving fiscal buffers.”