Page 45 - SE Outlook Regions 2022

For 2022, the government expects 4.5% growth, slightly more than the
EBRD’s 4% forecast. The low base effects and the resumption of
external financing support expectations for even stronger performance
depending, however, on further waves of COVID-19 that may defer
investment projects by foreign manufacturing groups that will likely seek
to develop or relocate to Moldova new production facilities.

2.6.2 External environment

Moldova’s current account deficit widened by 14% y/y in the third
quarter of 2021, to $400mn. The deficit in the four-quarter period
ending September 2021 increased to $1.57bn, from $1.52bn calculated
three months earlier. Compared to the four-quarter period ending
September 2020, the current account (CA) gap doubled — but this is
because the gap has narrowed during the lockdown period. Compared
to 2019 (the last full year before COVID-19 crisis), Moldova’s CA gap
still widened by 41%.

The country’s external deficit thus reached a new all-time record, both
in absolute terms and compared to its GDP: the four-quarter CA gap
accounted for 12% of the GDP over the same 12-month period ending
September 2021.

The net import of goods, typically large in Moldova compared to GDP
as a result of robust remittances financing private consumption,
increased by 16% y/y to $1.07bn in Q3 and by 30% y/y to nearly $4bn
in the rolling four-quarter period ending September. The net imports in
the 12 months ending September thus accounted for 30% of GDP.

Wage remittances in the four-quarter period ending September
(including transfers to households) remained below 14% of GDP but
still financed 43% of the net import of goods. The remittances to GDP
ratio has gradually declined from 16.4% in 2016 to 13.7% despite
reaching a new record of $1.78bn in the four-quarter period ending
September, up from $1.33bn in 2016.

45 SE Outlook 2022 www.intellinews.com