Page 134 - SE Outlook Regions 2024

The inflows of foreign grants and loans received by Moldova from the development partners and international financial institutions (IFIs) accounted for 5.1% of GDP in 2023 (and 6.5% in 2022) but will shrink
to 1.9% in 2024 – the lowest level in the 2021-2026 period.
Subsequently the country’s budget (public spending) will shrink by almost 3% of GDP from 38.8% of GDP in 2023 to 35.9% of GDP in 2024 and later to 33.3% of GDP. It is assumed that households will no longer need energy subsidies and firms will be helped by tax allowances (with an impact on revenues) rather than direct subsidies.
The deficit will decrease from 5.9% of GDP in 2023 to 4.6% of GDP in 2024 and 3-4% of GDP in 2025-2026.
Under the scenario sketched by the government, Moldova’s economy is supposed to have recovered after the 2022 shock and energy prices are expected to moderate globally in 2024.
This is quite an optimistic scenario at least on the domestic side – based on an economic growth profile of 2% in 2023 (highly unlikely) and 3.5% in 2024. Average inflation is expected at 5% in 2024, from
13.1% in 2023 – notably higher inflation (possibly in 2024) bodes well for the budget, balancing the downward risks attached to the economic growth profile.
The budget revenues, grants excluded, are expected to remain close to 30.6% of GDP in 2024, at the same level as in 2023. But they will decline to 30.4% in 2025 and 29.6% in 2026, indicating that the government intends to provide tax allowances as soon as the foreign financing strengthens.
Nominally the total revenues (grants included) will rise by 4.4% y/y to MDL107.2bn (€5.5bn), while the nominal GDP is expected to increase by 9.5% nominally. The revenues, without grants, are anticipated to rise at the same pace as GDP, by 9.4% y/y.
Public expenditures are planned to increase by only 1.5% y/y to MDL130bn in 2024. Combined with the 9.5% y/y advance of the GDP, this results in a 2.8pp decline of the expenditures to GDP ratio to
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