State of Country Report 2025

Economic stagnation continues, while the country’s economic growth model has exhausted its potential

The fragile economic situation of recent years has persisted into 2024–2025, with the expected recovery turning into recession. The pessimistic forecasts for agricultural production in 2024 materialised, with gross value-added declining by as much as 19 per cent. Similarly, the manufacturing sector stagnated, recording only a marginal increase of 0.1 per cent. This, in turn, negatively affected the export of goods, which fell by 13 per cent. Overall, the economy remained stagnant in 2024, with gross domestic product (GDP) growing by a mere 0.1 per cent—far below the anticipated 2 per cent recovery following the stagnation in 2023 and the deep recession in 2022. Moreover, during the third and fourth quarters of 2024 and the first quarter of 2025, GDP actually contracted, officially marking the onset of a technical recession. Even when excluding the drought-affected agricultural sector, the economy would have expanded by only 1.4 per cent in 2024—still well below expectations of a post-crisis rebound. The only genuinely positive developments were the increase in household consumption and investment activity. However, these were not sufficient to offset the broader weaknesses. Furthermore, the rise in consumption, amid stagnation in the industrial sector, fuelled higher imports and further worsened the trade balance. In fact, for every unit of goods exported, three units are imported. The opposite is true for trade in services, where exports exceed imports by a factor of two. 

The modest economic growth of recent years indicates that traditional sources of economic growth have now reached their limit and the country’s economic potential is continuing to erode. This aligns with the trend observed over the past several years of a gradual slowdown in Moldova’s potential economic growth. This slowdown began even before the Covid-19 pandemic in 2020 and Russia’s invasion of Ukraine in 2022. The root cause lies in the persistence of a cost-based model of economic competitiveness (driven mainly by low labour costs), which has, in turn, sustained an economy characterised by low value added and limited technological sophistication. Consequently, government programmes and policies must actively prioritise attracting investment in activities that generate higher added value—such as processing local raw materials, developing and promoting local brands, and automating and technologizing production processes across all sectors of the national economy. 

Modest economic growth also entails significant social costs.

In the first half of 2025, against a backdrop of rising inflationary pressures and weak economic growth, real wage growth slowed, real pensions stagnated, and remittances flows contracted. Although nominal wages increased by around 10 per cent compared to 2024, real wage growth remained modest, at below 2 per cent. The average real pension (including old-age and disability pensions) declined by 0.6 per cent in quarter 1 (Q1) 2025 and 0.3 per cent in quarter 2 (Q2) 2025 compared to the same periods in the previous year, even though the nominal average pension increased by approximately 8 per cent. Remittances continued their downward trend, falling both in nominal terms (-3 per cent in the first half of 2025 compared to the first half of 2024) and in real terms (-9 per cent in Q1 2025 and -11 per cent in Q2 2025). The employment rate for the population aged 20–64 fell by 3.1 percentage points in Q2 2025 compared to Q2 2024. Notably, employment decreased in public administration, education, health and social care, agriculture, industry, and construction, while it increased in transport and storage, as well as information and communications. Overall, the employed population declined by about 73,300 people compared to Q2 2024—not due to unemployment, but as a result of increased inactivity. The main drivers of this rise in inactivity were a growing number of people working abroad or intending to work abroad, as well as increases in the numbers of pensioners, pupils, and students. From a public policy perspective, to support wage growth and the formalisation of undeclared work, it is recommended to institutionalise an automated mechanism for subsidising wage increases and to raise the minimum wage to 50 per cent of the average gross wage.

The modest growth in real incomes, in the context of stagflation, has contributed to a rise in monetary poverty indicators. In 2024, the absolute poverty rate increased by 2 percentage points compared to 2023, reaching 33.6 per cent. The groups most affected were households with three or more children, people with disabilities, and individuals with general secondary or vocational secondary education. Despite the erosion of incomes, household final consumption recorded a notable increase in the first half of 2025 (+4.2 per cent in real terms), accompanied by a significant surge in new loans to individuals (+53 per cent in the first half of 2025 compared to the first half of 2024). This rapid expansion of lending, decoupled from income dynamics, may increase the financial vulnerability of households in the event of a disruption in the capital or labour market. Although mortgage lending also increased, access to housing worsened due to rigid supply in the real estate market. To improve access to housing, policies focused primarily on increasing supply, rather than solely supporting demand, are required. This includes reducing administrative barriers for conducting construction works, investing in municipal infrastructure, and supporting the construction of social housing. To address the high poverty rate among people with disabilities, it is recommended that disability pensions be increased by at least 15 per cent, until they reach the minimum subsistence level, estimated at Moldovan Leu (MDL) 3,050 in the first half of 2025.

However, some positive trends are beginning to emerge for 2025–2026

Entrepreneurship is accelerating, agriculture is showing mixed but improving results, industry is returning to growth after historic lows, and services continue to act as an engine of growth. The number of enterprises reached 68.7 thousand (a +7.8 per cent increase year-on-year (y-o-y)), and in January–July 2025, 15.8 per cent more new companies (5.9 thousand) were registered, reflecting greater confidence in the business environment. In agriculture, following a 14.6 per cent decline in 2024, an increase of 5–10 per cent y-o-y is expected in 2025, with better yields for corn and sunflower and an excellent grape harvest, although declines are anticipated for wheat, apples, and plums. After three consecutive years of decline, the share of industry in GDP reached historic lows (9.7 per cent) in 2024. In 2025, industry is expected to resume positive growth, mainly due to the recovery of the food sector and construction-related industries (metal construction, metallurgy, and furniture), as well as a low base of comparison. Services remain a key source of economic growth, driven primarily by the hotels, restaurants, and cafés (HoReCa), construction, and IT sectors.

The real sector is primarily driven by local private investment, while the financial sector is showing signs of improvement in regard to financial intermediation. Investment dynamics are largely fuelled by domestic private capital, supported by falling financing costs and investments in land intended for residential, logistics/industrial, and renewable energy projects. In contrast, foreign and mixed-capital remains relatively inert due to security risks stemming from the war in Ukraine. In the banking system, own funds stand at 25.1 per cent, well above the legal minimum of 10 per cent, and the loan-to-deposit ratio has risen from 0.56 in 2023 to 0.72 in July 2025. This expansion has been primarily in lending to households, with loans relative to GDP increasing from 8.7 per cent at the beginning of 2024 to 12.6 per cent in July 2025. At the same time, recent financial infrastructure reforms—including the implementation of the Single Euro Payments Area (SEPA), operational since October 2025, and MIA Business, already used by over 3,000 companies for person to business (P2B) payments, together with the new 2025–2030 capital market strategy—have expanded the potential for greater financial inclusion among the population and improved access to capital for businesses.

The business environment requires regulatory stability, early consultation on the European acquis, and targeted policy instruments, with a key priority being the effective implementation of the European Union’s (EU’s) Growth Plan for Moldova. Successful implementation of the plan depends on strong governance, inter-institutional coordination, and transparent project selection, to maximise impact and prevent clientelism. At the same time, continuous consultation with businesses on the transposition of the acquis is essential, as compliance costs disproportionately affect small and medium-sized enterprises (SMEs). These costs can, however, be mitigated through support from pre-accession funds and advance communication of regulatory changes.

The quality of governance remains a pressing issue and a significant barrier to European integration

Although the Republic of Moldova has made progress in transparency and alignment with European standards, governance continues to be hampered by structural and institutional shortcomings. Stakeholder participation is often limited, consultation outcomes are not fully utilised, and there remains a persistent imbalance in Parliament between initiatives advanced by the majority and those put forward by the opposition. European integration remains the main driver of reforms; however, to ensure the credibility and sustainability of this process, it is essential to accelerate public administration reforms, strengthen budgetary discipline, and professionalise the civil service, by applying a merit-based system.

The Republic of Moldova has made visible progress in strengthening judicial integrity and enhancing international cooperation against organised crime, but it remains vulnerable to electoral corruption and disinformation campaigns. External evaluations of judges and prosecutors have highlighted structural problems within the justice system, and ongoing difficulties in the functioning of the supreme courts continue to affect its stability. At the same time, vote rigging and illegal party financing undermine public confidence in democracy, while orchestrated disinformation—including from external sources—amplifies social polarisation and electoral risks. High-profile cases, such as the arrest of Evghenia Gutul and the extradition of Vladimir Plahotniuc, signal political and judicial will to combat corruption and foreign influence; however, the impact of such efforts will remain limited without effective asset recovery mechanisms and more resilient electoral and media institutions.

This publication is produced by the independent think tank Expert-Grup, in partnership with the Friedrich-Ebert-Stiftung (FES).The opinions expressed in this publication are those of the authors and are not necessarily shared by FES and Expert-Grup. The latter does not take a collective position.Commercialisation of FES publications is only permitted with the written approval of FES.